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






       THE RENEWABLE FUELS STANDARD: ISSUES, IMPLEMENTATION, AND
                             OPPORTUNITIES

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

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON ENERGY AND AIR QUALITY

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 6, 2008

                               __________

                           Serial No. 110-113


      Printed for the use of the Committee on Energy and Commerce
                        energycommerce.house.gov







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                    COMMITTEE ON ENERGY AND COMMERCE

                  JOHN D. DINGELL, Michigan, Chairman

HENRY A. WAXMAN, California          JOE BARTON, Texas
EDWARD J. MARKEY, Massachusetts          Ranking Member
RICK BOUCHER, Virginia               RALPH M. HALL, Texas
EDOLPHUS TOWNS, New York             J. DENNIS HASTERT, Illinois
FRANK PALLONE, Jr., New Jersey       FRED UPTON, Michigan
BART GORDON, Tennessee               CLIFF STEARNS, Florida
BOBBY L. RUSH, Illinois              NATHAN DEAL, Georgia
ANNA G. ESHOO, California            ED WHITFIELD, Kentucky
BART STUPAK, Michigan                BARBARA CUBIN, Wyoming
ELIOT L. ENGEL, New York             JOHN SHIMKUS, Illinois
ALBERT R. WYNN, Maryland             HEATHER WILSON, New Mexico
GENE GREEN, Texas                    JOHN B. SHADEGG, Arizona
DIANA DeGETTE, Colorado              CHARLES W. ``CHIP'' PICKERING, 
    Vice Chairman                    Mississippi
LOIS CAPPS, California               VITO FOSSELLA, New York
MIKE DOYLE, Pennsylvania             STEVE BUYER, Indiana
JANE HARMAN, California              GEORGE RADANOVICH, California
TOM ALLEN, Maine                     JOSEPH R. PITTS, Pennsylvania
JAN SCHAKOWSKY, Illinois             MARY BONO MACK, California
HILDA L. SOLIS, California           GREG WALDEN, Oregon
CHARLES A. GONZALEZ, Texas           LEE TERRY, Nebraska
JAY INSLEE, Washington               MIKE FERGUSON, New Jersey
TAMMY BALDWIN, Wisconsin             MIKE ROGERS, Michigan
MIKE ROSS, Arkansas                  SUE WILKINS MYRICK, North Carolina
DARLENE HOOLEY, Oregon               JOHN SULLIVAN, Oklahoma
ANTHONY D. WEINER, New York          TIM MURPHY, Pennsylvania
JIM MATHESON, Utah                   MICHAEL C. BURGESS, Texas
G.K. BUTTERFIELD, North Carolina     MARSHA BLACKBURN, Tennessee
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana

                                 ______

                           Professional Staff

                 Dennis B. Fitzgibbons, Chief of Staff

                   Gregg A. Rothschild, Chief Counsel

                      Sharon E. Davis, Chief Clerk

                 Bud Albright, Minority Staff Director

                                  (ii)
                 Subcommittee on Energy and Air Quality

                    RICK BOUCHER, Virginia, Chairman
G.K. BUTTERFIELD, North Carolina,    FRED UPTON, Michigan
    Vice Chairman                         Ranking Member
CHARLIE MELANCON, Louisiana          RALPH M. HALL, Texas
JOHN BARROW, Georgia                 ED WHITFIELD, Kentucky
HENRY A. WAXMAN, California          JOHN SHIMKUS, Illinois
EDWARD J. MARKEY, Massachusetts      JOHN B. SHADEGG, Arizona
ALBERT R. WYNN, Maryland             CHARLES W. ``CHIP'' PICKERING, 
MIKE DOYLE, Pennsylvania                 Mississippi
JANE HARMAN, California              ROY BLUNT, Missouri
TOM ALLEN, Maine                     STEVE BUYER, Indiana
CHARLES A. GONZALEZ, Texas           MARY BONO MACK, California
JAY INSLEE, Washington               GREG WALDEN, Oregon
TAMMY BALDWIN, Wisconsin             MIKE ROGERS, Michigan
MIKE ROSS, Arkansas                  SUE WILKINS MYRICK, North Carolina
DARLENE HOOLEY, Oregon               JOHN SULLIVAN, Oklahoma
ANTHONY D. WEINER, New York          MICHAEL C. BURGESS, Texas
JIM MATHESON, Utah                   JOE BARTON, Texas (ex officio)
JOHN D. DINGELL, Michigan (ex 
    officio)
                                 ------                                

                           Professional Staff

                     Sue D. Sheridan, Chief Counsel
                        John W. Jimison, Counsel
                   Rachel Bleshman, Legislative Clerk
                    David McCarthy, Minority Counsel











                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Rick Boucher, a Representative in Congress from the 
  Commonwealth of Virginia, opening statement....................     1
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     3
Hon. John Barrow, a Representative in Congress from the State of 
  Georgia, opening statement.....................................     4
Hon. Ed Whitfield, a Representative in Congress from the 
  Commonwealth of Kentucky, opening statement....................     6
Hon. Mike Doyle, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     6
Hon. John Shimkus, a Representative in Congress from the State of 
  Illinois, opening statement....................................     7
Hon. Jane Harman, a Representative in Congress from the State of 
  California, opening statement..................................     8
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     9
Hon. Tammy Baldwin, a Representative in Congress from the State 
  of Wisconsin, opening statement................................    10
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................    11
Hon. Jim Matheson, a Representative in Congress from the State of 
  Utah, opening statement........................................    12
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................    14
Hon. Edward J. Markey, a Representative in Congress from the 
  Commonwealth of Massachusetts, opening statement...............    15
Hon. Mike Rogers, a Representative in Congress from the 
  Commonwealth of Michigan, opening statement....................    16
Hon. Ralph M. Hall, a Representative in Congress from the 
  Commonwealth of Texas, opening statement.......................    17
Hon. John B. Shadegg, a Representative in Congress from the State 
  of Arizona, opening statement..................................    18
Hon. Lee Terry, a Representative in Congress from the 
  Commonwealth of Nebraska, opening statement....................    19
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, prepared statement................................   183
Hon. Charles W. ``Chip'' Pickering, a Representative in Congress 
  from the State of Mississippi, prepared statement..............   184

                               Witnesses

Hon. Stephanie Herseth Sandlin, a Representative in Congress from 
  the State of South Dakota......................................    20
    Prepared statement...........................................    22
Robert J. Meyers, Principal Deputy Assistant Administrator, 
  Office for Air and Radiation, Environmental Protection Agency..    24
    Prepared statement...........................................    26
    Answers to submitted questions...............................   193
Nathanael Greene, senior policy analyst, Natural Resources 
  Defense Council................................................    49
    Prepared statement...........................................    51
Bob Dinneen, president, Renewable Fuels Association..............    80
    Prepared statement...........................................    82
    Answers to submitted questions...............................   196
Charles T. Drevna, president, National Petrochemical and Refiners 
  Association....................................................    99
    Prepared statement...........................................   101
    Answers to submitted questions...............................   203
Randy Kramer, president, KL Process Design Group, LLC............   124
    Prepared statement...........................................   125
Scott Faber, vice president, federal affairs, Grocery 
  Manufacturers Association......................................   127
    Prepared statement...........................................   129
    Answers to submitted questions...............................   206
Rick Tolman, chief executive officer, National Corn Growers 
  Association....................................................   140
    Prepared statement...........................................   141
Mark Stowers, vice president, research and development, POET.....   151
    Prepared statement...........................................   152
Gawain Kripke, director, policy and research, Oxfam America......   156
    Prepared statement...........................................   159

                           Submitted Material

Charts accompanying Mr. Faber's testimony........................   132
Charts accompanying Mr. Tolman's testimony.......................   148
API, letter of May 6, 2008, to Hon. Fred Upton...................   186
25x'25, letter of February 25, 2008, to Messrs. Dingell and 
  Barton.........................................................   190
Society of American Foresters, letter of February 12, 2008, to 
  Messrs. Dingell and Barton.....................................   192

 
THE RENEWABLE FUELS STANDARD: ISSUES, IMPLEMENTATION, AND OPPORTUNITIES

                              ----------                              


                          TUESDAY, MAY 6, 2008

                  House of Representatives,
            Subcommittee on Energy and Air Quality,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:39 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Rick 
Boucher (chairman of the subcommittee) presiding.
    Members present: Representatives Boucher, Melancon, Barrow, 
Markey, Doyle, Harman, Gonzalez, Inslee, Baldwin, Ross, 
Matheson, Stupak, Green, Upton, Hall, Whitfield, Shimkus, 
Shadegg, Bono Mack, Walden, Rogers, Sullivan, Burgess, 
Blackburn, Terry, and Barton (ex officio).
    Staff present: Bruce Harris, Lorie Schmidt, Laura Vaught, 
Chris Treanor, Rachel Bleshman, Alex Haurek, David McCarthy, 
Andrea Spring, and Garrett Golding.

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

    Mr. Boucher. The subcommittee will come to order.
    This morning the subcommittee is conducting its first 
oversight hearing on the Energy Independence and Security Act 
of 2007 passed by the Congress last year and signed into law 
last December. The new law takes bold steps to increase the 
efficiency of energy use in commercial, industrial, and 
residential settings; promotes automobile fuel efficiency and 
reduces greenhouse gas emissions. It also substantially 
increases the renewable fuels mandate first adopted as part of 
the Energy Policy Act of 2005. Under the new law, annual 
increases in the volume of renewable fuels used in the national 
fuel supply are required, leading to a total renewable fuel use 
in 2022 of 36 billion gallons. The 2007 renewable fuel use was 
approximately 7 billion gallons, and under the new mandate, 
that volume must be 9 billion gallons by the end of this year 
and 11.1 billion gallons by the end of 2009. Beginning in 2009, 
the law requires that a portion of the total mandate be met by 
the use of advanced biofuels, and by 2022, advanced biofuels 
will account for the total mandate. Advanced biofuels are 
manufactured through the use of feedstocks other than 
cornstarch. But today cornstarch is the feedstock for most of 
the U.S. renewable fuel supply and it will remain the primary 
feedstock for years to come until advanced biofuels such as 
cellulosic ethanol achieve broad market commercial deployment.
    In 2007, 24 percent of the Nation's corn crop was devoted 
to biofuels production, and in the next several years that 
percentage may grow as the mandate of last year's law requires 
ever-greater volumes of renewable fuel use. In recent months, 
there has been a rise in expression of concern about increasing 
food prices, both domestically and globally. There is now clear 
competition for the corn supply between biofuel uses and food 
and livestock feed uses, causing corn price increases and a 
resulting increase in a range of food and feed prices. As corn 
production has increased, in part because of the rising demand 
for its use in biofuels, farmers have converted land once used 
for wheat and soybean production to corn, causing a rise in 
wheat and soybean prices as well.
    Other factors beyond biofuel use are also exerting upward 
pressure on food and livestock feed prices such as rising costs 
of petroleum and the effect of those increases on the 
transportation costs for fuel and livestock food and unusual 
weather events that have caused crop losses around the world 
and a greater level of meat consumption in developing 
countries, resulting in an increase in the demand for livestock 
feed crops.
    Beyond those concerns, in a series of recent reports, 
arguments have been advanced that the clearing of land for 
corn-based ethanol production releases large quantities of 
CO2 into the atmosphere, resulting in life cycle 
greenhouse gas emissions for the biofuels so produced that are 
greater than the life cycle greenhouse gas emissions of the 
petroleum that those biofuels displace. Calls have been made by 
some for a re-examination of the biofuels mandate in light of 
these concerns.
    Today we will hear testimony from a range of interested 
parties regarding the appropriateness of the mandate in light 
of the current debates over food and feed prices and the 
overall effect of ethanol production on the transportation fuel 
life cycle greenhouse gas emission. We will also receive 
testimony from our colleague from South Dakota, Stephanie 
Herseth Sandlin, the author of H.R. 5236, which would amend the 
renewable fuels standard to enable woody biomass removed from 
Federal lands to be used as a feedstock for cellulosic ethanol 
production, which in turn would qualify under the biofuels 
mandate. Also appearing this morning is Bob Meyers, a former 
counsel to this committee and currently an administrator of the 
Air and Radiation Office at the EPA. The EPA has broad waiver 
authority under the 2007 law to suspend the biofuels mandate in 
whole or in part, and Mr. Meyers will advise the subcommittee 
this morning of the status of consideration by EPA of the 
request that the Agency to date has received, asking that it 
exercise that authority.
    I want to thank all of our witnesses for joining us for a 
timely discussion today, and I would note that in making the 
decision of whether or not to make opening statements, members 
should be advised that if they waive their opening statement, 3 
minutes of questioning time will be added, not to the first 
witness but to the second witness, Mr. Meyers from the 
Environmental Protection Agency, and that slight change in our 
procedure is made pursuant to agreement with the Minority.
    Mr. Boucher. That concludes my opening statement, and at 
this time I am pleased to recognize the ranking member of the 
subcommittee, the gentleman from Michigan, Mr. Upton, for his 
statement.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Well, thank you, and I thank you, my friend, Mr. 
Chairman, for holding this important and certainly timely 
hearing.
    One of the major components of the recently signed Energy 
Independence and Security Act was an ambitious renewable fuel 
standard, or RFS. I have always been and remain supportive of 
renewable fuels. However, as we all know, Congress doesn't 
always get things right. The laws we write are not always 
perfect and only require re-examination, corrections, and 
oversight, and certainly there are some legitimate concerns 
with using food for fuel that we need to continue to examine.
    I believe that the goal of that legislation was to meet the 
needs of sound energy policy, environmental policy as well as 
national security. Many of the provisions in this new energy 
package that President Bush signed into law in fact meet that 
criteria. Unfortunately, after further examination and recent 
economic and environmental studies, the RFS may miss the mark 
in a few areas. For example, if the goal is to increase our 
usage of renewable fuel, we should examine the impact on 
cutting the import tariff, which would certainly bring 
hopefully a flood of renewable fuel to the market. I will be 
asking our witnesses about that proposal.
    I want to be perfectly clear: I support the use and 
development of renewable fuels. I introduced a bill in the last 
Congress and again in January of last year along with Mr. Doyle 
that requires all gasoline sold in the United States after 2012 
to contain a minimum of 10 percent renewable fuels, something 
that the State of Minnesota already has on the books. We are 
careful not to specify any one technology or source of fuel, 
allowing the market to fill the need, be it corn-based ethanol, 
cellulosic or fuel from algae, other renewable sources, perhaps 
even sugar. The new RFS does not allow our technology-neutral 
and feedstock-neutral model. I believe that this may be 
contributing to many of the problems with the RFS.
    While biofuels such as ethanol are not the silver bullet to 
cut fuel prices or increase supply, they are in fact an 
important part of the overall puzzle, along with conservation, 
efficient technologies, and increasing domestic oil supply 
through increased production. Under current law, there is no 
effective safety valve to allow for unforeseen difficulties in 
meeting the required ethanol volumes that last for more than a 
year, such as ethanol production shortfalls. Many proposed 
plants are being canceled or delayed due to the high cost of 
corn or inconsistent State laws that prevent refiners from 
meeting the national renewable mandate. For example, the 
Nation's largest gasoline market, California, limits the amount 
of ethanol in gasoline to 5.7 percent until 2010, and in 2008 
the Federal requirement translates to 7.7 percent, in 2009, 
about 9 percent. The California deficit would need to be made 
up in the rest of the country through increased blending and 
some refiners cannot easily meet the California deficit with 
refiners in the rest of the country since the EPA regulations 
and car warranties currently prohibit blending above 10 percent 
use in conventional autos.
    Recognizing that problem, I introduced a bill with my good 
friend, Charlie Gonzalez, that would provide refiners with more 
time to meet that biofuel mandate. Our legislation would allow 
a carry forward of up to three calendar years for refiners to 
make up deficits in meeting the mandate in 2008, 2009, and 
2010. For instance, refiners who do not blend in enough 
renewable fuel in 2008 would have until 2011 to make up that 
deficit. Current law provides refiners who do not blend in 
enough renewable fuels a shorter 1 year window to make up that 
deficit. This bipartisan legislation would help avoid supply 
shortages and price spikes that might otherwise occur.
    Now, I am one that reads and signs all of my legislative 
mail, all of it, and one of the top issues that our 
constituents are concerned about is certainly the high cost of 
gasoline. The price of a barrel of oil is strongly entrenched 
above $100. Today the price is over $120 with no sign of 
retreating. Gasoline prices are on a path toward $4 a gallon 
yet America's oil resources remain off limits to exploration. 
According to Federal government estimates, there is enough oil 
in deep waters many miles off our coast and on Federal lands to 
power more than 60 million cars for 60 years. Additionally, if 
we advance the commercialization of the Nation's 2 trillion 
barrel shale oil resource, we will meet the U.S. oil needs for 
over 2 centuries. It would be ideal if we could grow all of our 
own fuel. However, this is not a possibility, and if we 
overreach we will be creating even more problems.
    Along with a strong RFS, if we were permitted to utilize 
our vast domestic energy resources, prices would fall and the 
United States would achieve a greater level of energy security. 
Inexpensive energy helped build our economy into the most 
powerful and prosperous in the world, and high energy costs 
obviously take us in the opposite direction. We can all talk 
about alternative energy. Well, the alternative to our existing 
policy is to achieve lower prices along with energy security by 
relying on environmentally friendly American energy. American 
energy includes renewable fuels, coal-to-liquids, oil shale and 
the vast reserves of domestic oil and natural gas that are 
being blocked by shortsighted policy. We owe it to the working 
families to pursue an energy policy with a vision of the 
future. We cannot stand idly by for another year and allow gas 
to go up to even perhaps $5 a gallon.
    At this point I would like unanimous consent to put a 
letter in from API, which I have somewhere in my notes, and 
with that, Mr. Chairman, I yield back my time. Thank you.
    Mr. Boucher. Without objection, that letter will be made a 
part of the record.
    [The information appears at the conclusion of the hearing.]
    Mr. Boucher. The Chair recognizes the gentleman from 
Georgia, Mr. Barrow, for 3 minutes.

  OPENING STATEMENT OF HON. JOHN BARROW, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF GEORGIA

    Mr. Barrow. I thank the Chair.
    At the outset, I want to commend Ms. Herseth Sandlin for 
her bill and her legislation, which I think tries to strike the 
right balance here. I agree with her that we need to sort of 
widen the definition of what wood waste can be for effective 
advanced biofuels policy. But at the same time, I want to make 
sure that we don't loosen it so much that we end up deranging 
the market for other products.
    I have a huge stake in this myself. In my district, in 
Treutlen County, Georgia, Range Fuels is building the first 
commercially viable, commercial-scale cellulosic ethanol plant 
in the country, and it is our plan to try and provide added 
value for stuff that has no value right now, and I advocated 
very strongly for a substantial grant from the Energy 
Department to try and jump-start that operation there, and the 
vision that we have is, the things that have no value right now 
can be better put to advanced biofuels development, and stuff 
that has existing value, and that is a concern I have got 
because I have also got a stake in this, because I sat in the 
same room with folks in my party and the leadership of my party 
are writing checks on Georgia's supply of biomass that we just 
can't cash in our State. I have sat around with folks that 
basically said we got enough biomass in Georgia to do this, do 
that, we got other things going on with Georgia biomass right 
now like the pulp industry and the construction industry. We 
have a lot of uses for the stuff that we are doing right now in 
Georgia.
    We talk about not wanting to pick winners and losers and 
not try and play favorites with the programs that we initiate, 
and we adopt programs that ostensibly look neutral in their 
impact and will rely upon the invisible hand of the marketplace 
to sort of guide our choices but existing technology can only 
meet a certain mandate in a certain way and incentives geared 
toward providing that we do it by way of existing technology, 
we will find out that the invisible hand is a very heavy hand 
and it can derange a lot of existing markets.
    What I think we ought to be doing--I can't help but relate 
to this problem in terms of my own experience as a local 
elected official. Perhaps we ought to be thinking about this a 
little bit more the way county commissioners or city councilmen 
think about zoning decisions because it is a zero-sum game. You 
change the zoning of a piece of land since they aren't making 
any more land, you change the zoning and you are reducing the 
supply of land that can be used one way and you are increasing 
the supply of land to be used in another way. It is a zero-sum 
game. And we ought to be thinking about what we are doing with 
our energy feedstocks the way city councilmen and county 
commissioners have to think about zoning decisions. What is the 
highest and best use of this energy feedstock over here and 
what is the highest and best use of that energy feedstock over 
there, and let us not pretend we are being neutral when 
actually we are setting up things in an ostensibly neutral 
fashion and it is actually going to take all of the feedstocks 
being used for one purpose and apply it toward another. So if 
we can think about that, I think that will certainly guide my 
thinking of this, and I am interested in hearing what the 
witnesses have to say about how we can make more effective 
decisions that take advantage of the marketplace and are 
neutral in effect as well as in purpose.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
    Mr. Boucher. Thank you, Mr. Barrow.
    The gentleman from Kentucky, Mr. Whitfield, is recognized 
for 3 minutes.

  OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

    Mr. Whitfield. Mr. Chairman, thank you very much, and we 
genuinely appreciate your holding this hearing this morning on 
a topic of great importance for the entire country.
    I might say that recently I met with a group of agriculture 
leaders and they made the comment that the Nation's energy 
policy, particularly referring to this mandate on ethanol 
production, has more of an impact on agriculture than the 
agricultural policy. So I think it is imperative that we move 
deliberately and cautiously in trying to reverse a policy until 
we understand completely the ramifications on it as it relates 
to agriculture prices, as it relates to oil prices.
    And so I want to commend the chairman for the hearing. We 
look forward to some of our witnesses today, who have some 
expertise in this area to help us move forward in a way that is 
most likely to be correct for our country, and I yield back my 
time.
    Mr. Boucher. Thank you very much, Mr. Whitfield.
    The gentleman from Pennsylvania, Mr. Doyle, is recognized 
for 3 minutes.

   OPENING STATEMENT OF HON. MIKE DOYLE, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Doyle. Thank you, Mr. Chairman.
    Mr. Chairman, it sometimes happens that we here in Congress 
pass policies that don't turn out as good in the real world as 
they looked on the drafting paper, and despite our best 
intentions and due diligence, the law of unintended 
consequences rears its ugly head, forcing us to revisit our 
earlier policy decisions. That is what I believe is happening 
today in regard to corn-based ethanol, and I commend you, Mr. 
Chairman, for holding this hearing so that we can again look at 
the renewable fuel standards so that we can ensure that we get 
the results we seek without causing more problems in the 
future.
    I remember back when we passed the ethanol mandates back in 
the Energy Policy Act. Corn ethanol was presented almost as a 
holy grail solution to the challenges presented by our 
dependence on foreign oil. It seemed at the time that we could 
not only start to break the chains of this dependence but we 
could do it in a way that would benefit the American farmer and 
put us on a path to combating global warming. While time has 
proven that some benefits have resulted from this policy, most 
notably the increased profits in the agricultural sector, I 
believe its negatives today far outweighs its benefits.
    I have said time and time again that there is no silver 
bullet to address the dual challenges of energy independence 
and global warming. There is no one policy we can adopt or one 
technology we can develop to meet these challenges. 
Unfortunately, our committee and our Congress essentially chose 
food-based ethanol and encouraged the private sector through 
authorizations in the tax code to pick this biofuel over 
others. We must learn from this mistake and roll back these 
policies.
    Now, don't get me wrong: I am not advocating for a rollback 
of the entire renewable fuel standards as I believe the 
standard itself can help move us toward energy independence. 
What I am advocating is that we roll back the support structure 
that food-based ethanol receives and which other promising 
biofuels are not. We need to encourage all of these advances, 
not pick the one we can sell better at home. Food prices are 
rising. Rain forests are being deforested and we need to 
understand the real-world realities that this policy has 
caused. Any food that is used for fuel is a food that won't be 
used to feed our Nation and to a large extent, the world. We 
have other options such as algae, municipal waste, and the 
like, which offer a path toward energy independence but don't 
put the burden on the backs of the hungry to pay for it or pay 
for it by destroying rain forests.
    In conclusion, Mr. Chairman, we need to revisit this policy 
and back away from food-to-fuel policies and instead accelerate 
the development of biofuels that don't put our energy needs 
ahead of the needs of the hungry or the environment.
    With that, Mr. Chairman, I yield back the balance of my 
time.
    Mr. Boucher. Thank you, Mr. Doyle.
    The gentleman from Illinois, Mr. Shimkus, is recognized for 
3 minutes.

  OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Shimkus. Thank you, Mr. Chairman. It is great to have 
this hearing, although I am really concerned how shortsighted 
we are. I want to welcome Congresswoman Herseth Sandlin and her 
position.
    This is the cell phone in 1986. It is a brick. This is my 
BlackBerry today. This whole debate on ethanol is a debate 
about the current availability versus future technology. What 
you all did in the Energy Security Act was say we have to 
develop corn today and move to cellulosic for the future. That 
is all your bill did. That is all your bill did and that is 
where we need to go. So this is very frustrating. How 
shortsighted we are to walk away. You know, we have 8.5 billion 
gallons in ethanol refinery. When we passed the Energy Policy 
Act in 2005, I told you all, I said OK, don't build any new 
crude oil refineries, we will just continue to build ethanol 
refineries. Check the record. That is what I said. And because 
you all won't go to other supplies of fuels, your default is 
renewable fuels.
    This is where we are today. When your Majority came in, $58 
a barrel. Today, $120 a barrel. Two dollars and 33 cents a 
gallon of gas, $3.66 today. With climate change, 50 more cents. 
$4.16 is what we would pay. Take away the ethanol mandate, 
another $1.10. Do you know how much ethanol adds to our fuel 
mix today? You take that away, you add another $1.10 to the gas 
at the pump. So now we are at $5.26 a gallon. Nobody wants to 
pay that.
    Why am I so frustrated? Chairman, we have had this debate. 
We had motions to recommit on the bill, alternative fuel 
standards, not just an RFS. What is an alternative fuel? It is 
electric vehicles put into the standard. It is coal-to-liquid 
put in the standard. It is OCS put in the standard. It is all 
these other things that we could do to increase supply. We are 
not one-trick ponies. We want more supply. You all won't give 
it to us. And what we have, we are going to have--we continue 
to have escalating prices. Corn is the bridge. It is this cell 
phone. Cellulosic is here. That is why I appreciate your bill. 
And that is where we need to go but we can't jettison the 
present and not get to the future. And we are going to send 
terrible signals to the investment community just because we 
are scared and we are not willing to handle this debate on 
energy prices in a realistic manner, we are going to send 
terrible signals to not only to corn-based ethanol but all the 
cellulosic technologies because we are haphazard, we don't 
plan. We have a terrible supply debate on energy. We need more 
supply to have lower prices.
    I am glad we had this hearing, Mr. Chairman.
    Mr. Boucher. Well, thank you very much, Mr. Shimkus. I 
particularly appreciate the last sentence. And as the gentleman 
knows, I share his view with regard to the need for a broader 
range of alternative fuels, particularly coal-based.
    The gentlelady from California, Ms. Harman, is recognized 
for 3 minutes.

  OPENING STATEMENT OF HON. JANE HARMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Ms. Harman. Thank you, Mr. Chairman.
    I do want to apologize to our first witness, Ms. Herseth 
Sandlin, for leaving the hearing after I speak. I have a 
competing subcommittee hearing and a full committee hearing 
this morning, and I regret that I can't hear your testimony.
    Mr. Chairman, I think injecting partisanship is not 
particularly useful at this point. Last year members of this 
House and members of this committee on a bipartisan basis 
believed that an expanded renewable fuels mandate was a win for 
both climate change and a win for energy independence. The 
benefits of cellulosic ethanol and other advanced biofuels are 
extraordinary and the Federal government should encourage the 
development of those resources. But in my view, our enthusiasm 
for corn ethanol deserves a second look. That is all I am 
saying. It deserves a second look. Sure, the billions of 
gallons of corn ethanol that American farmers will produce this 
year can displace some billions of gallons of foreign oil, but 
the greenhouse gas reductions of corn ethanol appear to have 
been overstated, and now it looks more and more that we are 
robbing Peter to pay Paul, and judging by the skyrocketing 
prices of milk, eggs, and flour, robbing ourselves too.
    Changes in the U.S. corn market alone are not to blame for 
the climbing price of food in the United States or the scarcity 
of staple crops in places like Somalia and Haiti. We can point 
to poor harvests in Australia, Canada, and the Ukraine as other 
culprits. But weather changes, perhaps caused by climate 
change, may account for these regions' poor grain production 
this year. The 2-year drought in Australia, the world's second 
largest wheat producer, has cut its production by a third.
    So what is the lesson? The lesson is that climate change is 
linked to policy debates about fuel, food, and security. We 
cannot afford to think of them as separate issues, something 
that I know Al Gore has been telling us for years. Energy 
independence can help us fight terrorism. In the long run, 
growing our own fuel can insulate us from political instability 
and keep American dollars from funding repressive regimes and 
violent causes. But if our policies promote starvation in 
unstable regions of the world, we may end up producing more 
terrorists no matter how we get our energy.
    So in sum, Mr. Chairman, I am glad you are holding this 
hearing. I am glad we have a diversity of views in our several 
panels. I will try to come back to hear some of the testimony. 
But I think we are doing the right thing by taking a second 
look at what we did last year. I think we did the right thing 
last year but it may need some fine-tuning.
    I yield back the balance of my time.
    Mr. Boucher. Thank you, Ms. Harman.
    The gentleman from Oregon, Mr. Walden, is recognized for 3 
minutes.

  OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. Walden. Thank you, Mr. Chairman. I too appreciate this 
hearing. I know when I am at home, a lot of people are 
concerned about the rising food costs and they have a lot of 
questions about ethanol and whether or not it contributes to 
that, and so I think we will learn a lot from our witnesses 
today. I especially want to welcome our colleague, Ms. Herseth 
Sandlin, who I have worked with on numerous occasions on 
forest-related legislation, and I am pleased to be one of the 
original cosponsors of H.R. 5236.
    I think this committee made a mistake and this Congress 
made a mistake when it slipped in a provision that precludes 
the use of woody biomass from Federal forestlands and from 
anything other than plantation-planted forestlands on private 
ground from using any ethanol derived from that mass to count 
against the RFS. It makes no sense. There are laws on the books 
already that determine how you harvest forests on Federal 
ground, trees on Federal ground, how we do all that. That is 
already there. Those management rules are already in place. 
Those laws are already in place. What this committee did or 
what this Congress did was say that ethanol produced from woody 
biomass doesn't count against the RFS if it comes off Federal 
ground.
    Now, I know we are going to hear testimony from some of the 
environmental groups that claim that preventive thinning from 
national forests as a biofuel source makes little economic or 
ecological sense and then they argue against thinning to 
control burns. I would like to invite these people out to my 
district where we see these incredible forest fires that burn 
hundreds of thousands of acres and leave incredible devastation 
behind and then some of these same groups litigate and stop the 
harvest of the burned dead trees which the material could be 
used to go into various biomass uses.
    And so I obviously disagree with their viewpoint on this 
and agree with Representative Herseth Sandlin. I hope this bill 
passes and I hope the provision that was slipped into this 
energy bill will be repealed. It makes no sense the way it is.
    So Mr. Chairman, I yield back the balance of my time and I 
thank you for this hearing.
    Mr. Boucher. Thank you very much, Mr. Walden.
    The gentleman from Texas, Mr. Gonzalez, is recognized for 3 
minutes.
    Mr. Gonzalez. I waive opening.
    Mr. Boucher. The gentleman waives his opening statement.
    The gentlelady from Wisconsin, Ms. Baldwin, is recognized 
for 3 minutes.

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

    Ms. Baldwin. Thank you, Mr. Chairman. I thank you 
especially for holding this important and timely hearing, that 
with rising food prices and soaring fuel costs is the subject 
of many discussions around the country and certainly in my home 
State of Wisconsin.
    In December, Congress passed the Energy Independence and 
Security Act, which made an historic commitment to American 
biofuels with its increase in the renewable fuels standard. It 
creates American jobs and provides critical environmental 
safeguards to ensure that the growth of homegrown fuels helps 
reduce carbon emissions and does not degrade water or air 
quality or harm our lands or public health.
    Since the first large-scale ethanol plants opened in 
Wisconsin in 2002, my home State has increased ethanol 
production levels to almost half a billion gallons annually at 
nine plants across the State. Wisconsin is now in the top 10 
States for overall production. Meanwhile, air quality in my 
home State has improved and the price of gas would be about 15 
percent higher, according to Merrill Lynch analysis, if ethanol 
consumption were diminished. Moreover, a number of the 
producers in my State have created a food and fuel scenario 
rather than a food versus fuel scenario by using the process 
that separates the protein from the starch in the corn kernel, 
allowing for the production of ethanol and a dried distiller 
grain product that is used as feedstock for animals.
    Now, I can appreciate the concern that increasing corn-
based ethanol production has some unintended consequences on 
the world's food supply. However, the issue cannot be examined 
in a vacuum. In fact, according to one study, the cost of corn 
used to produce food is on average about 3.2 percent of the 
total typical consumer's grocery bill. That means that 96.8 
percent of the remaining cost of food depends on other factors, 
other food input, food marketing, processing, packaging, 
transportation to market. Adding costs to the mix are the 
worldwide drought, fuel costs and exploding demand elsewhere in 
the world, especially among developing countries, and 
speculation in the commodity markets. And given the state of 
our flailing economy here in the United States, it is simply 
foolish to only examine one of these factors or make drastic 
decisions to undo a carefully crafted policy that we just 
enacted 5 months ago.
    Certainly, though, ethanol is not the only answer but it 
should be a part of a multifaceted approach as we move forward. 
We will only be able to perfect the science of lowering 
greenhouse gas emissions and addressing energy independence if 
we set the stage through research, technology, infrastructure, 
and policy advancements, all of which open the door for third-
generation biofuels including cellulosic ethanol from 
switchgrass and other inputs.
    Last year, the Department of Energy made a commitment to 
moving forward with advanced biofuels when it awarded the 
University of Wisconsin, in partnership with Michigan State 
University, a $134 million grant to develop one of three 
national research centers aimed at converting woodchips, 
grasses, corn stalks, and other plant-based materials into 
biofuels. The science that will emerge from this center would 
not be possible without our commitment to corn-based ethanol.
    Mr. Chairman, I hope that today's hearing will shed light 
on this issue. We must examine the warning signs that are out 
there but we certainly will not be able to address our 
country's growing energy needs if we are to run away from this 
challenge. Thank you, Mr. Chairman.
    Mr. Boucher. Thank you very much, Ms. Baldwin.
    The gentleman from Texas, Mr. Burgess, is recognized for 3 
minutes. Oh, I am sorry. The ranking member of the full 
committee has arrived. The gentleman from Texas, Mr. Barton.
    Mr. Barton. That is OK, Mr. Chairman.
    Mr. Boucher. Mr. Burgess, would you take your 3 minutes, 
please?

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF TEXAS

    Mr. Burgess. I will be pleased to, Mr. Chairman. Thank you 
also for holding this hearing today.
    You know, just yesterday as kind of a warm-up for this 
hearing, we did a Republican House Policy Committee hearing 
over at the Library of Congress on this very issue, the food-
to-fuel issue, and I must say, I was pleasantly surprised by 
the caliber of witnesses we had, many of the same witnesses we 
are going to hear from today, and very surprised by the 
turnout, at least from staff from member offices, and we even--
Mr. Chairman, I think we even had a Democrat in the audience, 
so it became a bipartisan event, not just a Republican House 
Policy Committee event.
    So certainly we need to dig deeper into this issue, and we 
have heard some of the issues already discussed on both sides 
of the dais this morning. You know, Mr. Chairman, we are all 
pretty familiar with the renewable fuel standards from the 
Energy Policy Act of 2005 because we talked about that, we 
debated that almost like a pure Athenian democracy here in this 
committee for hour after hour, but I really don't recall that 
much discussion about the policy of 2007 because it kind of 
came to us, if you will recall, late in the game, and once 
again subverted the committee process, and it kind of leads us 
to some of the anxiety, I think, that we are experiencing this 
morning.
    Now, my governor, Rick Perry from Texas, has submitted a 
letter to Administrator Johnson at the Environmental Protection 
Agency talking about the renewable fuels standards mandate and 
how it will negatively impact the citizens of Texas to over 
$3.5 billion if corn prices reach their estimated price 
threshold this year, and Governor Perry and the Connecticut 
governor have submitted requests for relief from the renewable 
fuels standard because they must face the realities of the 
unintended consequences of Congressional biofuel mandates.
    And we have heard a little bit about unintended 
consequences today, and you know, it used to be in Congress, 
unintended consequences would be visited upon you 2 decades, 3 
decades later, and now because of the issue of compression of 
the timeline, we are seeing the unintended consequences come at 
us mere months after we make unwise policy decisions so it is 
important that we fully vet this issue and it is important that 
we come to the right conclusion because we are not going to 
outlive our unintended consequences this time, I don't believe.
    So Mr. Chairman, thank you for taking a hard and serious 
look at the costs associated with the renewal fuel standards. 
What additional price should we ask our country's citizens to 
pay for energy independence? How can we expect the developing 
world to react when their growing economies are demanding more 
and more food or facing starvation? We heard from a member on 
the other side that said growing our own fuel will insulate us 
from the instability in the world, but the reality is, growing 
our own fuel may in fact lead to some of that instability 
around the world if people indeed cannot get enough to eat.
    So here we are, the committee of jurisdiction, we are 
having the opportunity to oversee and fully vet what others 
thought we were not capable of crafting. I encourage us to 
proceed on this. I think this committee, with its long history 
of successful bipartisan legislation, has the right tools, 
right manpower, womanpower, the right brainpower to make the 
necessary changes to save this and make it a more workable 
policy in the future.
    So with that, Mr. Chairman, I will yield back my time.
    Mr. Boucher. Thank you very much, Mr. Burgess.
    The gentleman from Utah, Mr. Matheson, is recognized for 3 
minutes.

  OPENING STATEMENT OF HON. JIM MATHESON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF UTAH

    Mr. Matheson. Thank you, Mr. Chairman.
    This is a very complicated issue, and I think Members of 
Congress and a lot of other folks are asking a lot of questions 
about how we can navigate this issue to achieve greater energy 
independence and make progress on climate change as well. It is 
an issue that hit the popular press just in the last month with 
Time magazine asking about this policy is it doing the right 
thing, is it driving up food prices, is it making global 
warming actually worse.
    I would echo what Dr. Burgess said about the fact that this 
issue as it came up in the 2007 Energy Policy Act really didn't 
go through the regular order of this committee, and I think 
that it is unfortunate. This is a very substantive, capable 
committee. It is why I was so interested in joining this 
committee, and as a first-term member of the committee, I think 
that this is the type of issue where this committee can really 
perform a good service to this country and I think it is 
unfortunate that the renewable fuels effort didn't go through 
regular order. I am not saying we wouldn't have maybe had a few 
things slip through that we wouldn't have gotten right but 
already people are saying we need to revisit what happened in 
the 2007 Act. We do need to try to get this right. Just one 
quick example, we got today the legislation from Representative 
Herseth Sandlin pointing out one of the weaknesses in the 2007 
Act that excluded certain types of biomass fuel. Now, I think 
that is a very legitimate issue. I think that we are probably 
going to want to take action to include that in the mix. Those 
are the types of discussions we ought to be having on this 
issue and work in a bipartisan way to try to have credible 
policy that balances competing needs of energy independence, 
climate change, and security of our food supply.
    And so, Mr. Chairman, I want to thank you for holding this 
hearing and I just ask we ought to hold a number of hearings on 
this issue and really try to flesh this out. We can't turn the 
clock back and do it before the bill was passed last December 
but we can certainly conduct ourselves with our oversight 
responsibilities and try to make good policy changes moving 
forward.
    I will yield back my time.
    Mr. Boucher. Thank you, Mr. Matheson.
    The gentleman from Texas, Mr. Barton, ranking member of the 
full committee, is recognized for 5 minutes.
    Mr. Barton. Thank you, Mr. Chairman. I am going to submit 
my written statement for the record. I just want to make a few 
extemporary remarks.
    First, I appreciate you holding this hearing. I appreciate 
the cooperation with the Minority on witnesses, and I 
appreciate the willingness to take an honest and fresh look at 
this issue. When I was chairman of this committee, we passed 
the Energy Policy Act of 2005. It was an open, bipartisan 
process in this committee, in the House, in the Senate, and in 
the conference committee. We had open conference committee 
hearings and markups in this very room.
    There is a renewable fuel standard in that Act. For this 
year, the renewable fuel standard is 5.4 billion gallons and it 
rises to an estimated 8.6 billion gallons over time. Under the 
legislation that was signed into law this past December, we 
have a new biofuel mandate. It is 9 billion gallons this year. 
It cannot be met. There is not enough biofuel in the country to 
meet it. I think that is probably one of the reasons we are 
holding this hearing. Nobody likes to see food prices 
skyrocketing like they are skyrocketing. Nobody likes to see 
our U.S. domestic fertilizer capacity cut in half, and half our 
fertilizer plants being shut down. Nobody on either side of the 
aisle likes the unintended consequences of what the proponents 
passed last December with the past of intentions.
    I am going to be introducing a piece of legislation, Mr. 
Chairman, this week to repeal section 202 of last year's Energy 
Act and just go back to the previous biofuel mandate in the 
2005 Act. Now, that is not a perfect solution and it may not be 
acceptable but at least it is doable. There are things that can 
be done. We are going to hear about some of those things today. 
And one of the things that can be done is obviously to do 
nothing. If we do nothing, we are going to have the chaos that 
we have right now and it will just be political finger 
pointing.
    So Mr. Chairman, I do hope that the aftermath of this 
hearing is as positive as the lead-up to it and that we do work 
together, and if there is a solution that is acceptable to the 
biofuels community and to the farm community and to the food-
producing community and to the consumers, all the various 
environmental groups that we can come together and find that 
balance point.
    With that, Mr. Chairman, I yield back.
    Mr. Boucher. I thank the gentleman and assure him that we 
will welcome his thoughtful contributions to our deliberations.
    The gentleman from Louisiana, Mr. Melancon, is recognized 
for 3 minutes.
    Mr. Melancon. Thank you, Mr. Chairman. I will waive my 
opening statement.
    Mr. Boucher. The gentleman waives his opening.
    The gentleman from Texas, Mr. Green, has left. The 
gentlelady from Tennessee, Ms. Blackburn, is recognized for 3 
minutes.

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF TENNESSEE

    Ms. Blackburn. Thank you, Mr. Chairman. I join all of our 
colleagues in thanking you for the hearing and looking at the 
links between the RFS and food prices.
    We all know, and as you have heard this morning, that 
biofuels can and should play a part in our renewable energy 
development and our ag community wants to play a part in this 
as we look toward energy independence and how we best achieve 
energy independence, and we have all heard a lot about the 
unintended consequences that have come from crops that are used 
for food being used as a part of this chain. We have seen, and 
Mr. Burgess alluded to this, the part of the debate that we 
look at areas of the world like China and India and the 
increase in global income and then therefore the demand that is 
there for processed foods and for meats and the impact that 
this has on the global food market. And I think that as we look 
at this, and I am glad that we are reviewing the issue today 
because we do have to go in and look at what has happened with 
corn production, with prices, with the existing reserves and 
then the effect that this has had on those crops, on the 
marketplace and then on corn production, wheat production, and 
soybeans, which come from my district in rural west Tennessee. 
And we also are hearing from our constituents about the cost of 
meat, grocery prices, what is happening, and as they are 
rolling that cart down the aisle at the grocery store and they 
are seeing this played out across the board, they are indeed 
angry, they are discontented with some of the steps that we 
have taken, and they are realizing these unintended 
consequences. I am glad that they are ahead of Congress on this 
issue and that they do want to see us take some action. Also, 
we are hearing from many of our constituents about some of the 
speculative activity in the futures market and the way this, a 
lack of risk management that has been there and the way this is 
having an impact. We all know that high energy prices are a key 
factor behind what is happening with food and food prices. We 
know, as has been said this morning, there are steps that can 
be taken to mitigate this. We are looking forward to seeing how 
we best move forward.
    I thank you, Mr. Chairman, and I yield the balance of my 
time.
    Mr. Boucher. Thank you very much, Ms. Blackburn.
    The gentleman from Massachusetts, Mr. Markey, is recognized 
for 3 minutes.

OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN 
        CONGRESS FROM THE COMMONWEALTH OF MASSACHUSETTS

    Mr. Markey. Thank you, Mr. Chairman, very much.
    Mr. Chairman, the energy bill which the Democratic Congress 
passed and was signed by President Bush is already working. A 
broad spectrum of analysts, including those working at 
McKinsey, Consumer Federation of America, and Iowa State all 
find that ethanol is helping to lower the price of gasoline. 
While $3.60-a-gallon gasoline is bad, it could be worse. By 
driving the development of new fuel possibilities, the energy 
bill is ensuring that the next generation of biofuels will also 
expand the opportunity for all regions of the country to 
produce the fuels that meet their needs the best.
    Massachusetts once played a critical role in the U.S. 
energy supply back when Melville was writing by whale-oil lamps 
about Captain Ahab's pursuit of Moby Dick. With the 
commercialization of technology now being developed in the 
State, Massachusetts could once again begin to meet its own 
fuel needs and help other parts of the country to do the same. 
But we must be good captains of the biofuels ship and be aware 
of the challenges facing their development and the wider 
impacts they could have. Today we will explore a crucial one. 
Along with other factors including increasing global demand, 
rising energy costs, greater speculation in the commodities 
market, and bad weather, corn ethanol production is also 
contributing to an increase in corn prices.
    With the impact on food prices in mind, the renewable fuels 
standard was designed to drive development of biofuels from 
feedstocks that are also not food stocks. Some have argued that 
since Congress can only control the renewable fuels standard, 
we should reduce the mandate to control food costs. But it is 
unclear whether that would actually reduce corn prices and 
instead could impede the critical development of biofuels from 
non-food sources.
    Instead, we should move in the direction that the Farm Bill 
appears to be going: reducing the subsidies for corn ethanol, 
which allows ethanol producers to buy corn at a higher price 
and increase the financial incentives for using cellulosic 
ethanol and other advanced biofuels. Likewise, Massachusetts 
has eliminated the State gasoline excise tax on cellulosic 
biofuels to encourage their use, and we should consider, as our 
witness from the NRDC advocates, developing a single 
performance-based financial incentive for renewable fuels that 
will drive development of biofuels that are best for the planet 
and for the pocketbook. This is the direction we should be 
heading. This, combined with the 35-mile-per-galloln standard 
that we passed after a 35-year lag in December of 2007, is the 
way we should go in order to break our dependence upon imported 
oil and at the same time protecting the planet. The standard 
for fuel economy will back out the equivalent of all the oil we 
import from the Persian Gulf. We need a smart strategy for 
reducing the subsidies for corn while increasing dramatically 
the subsidies for cellulosic fuel. If we do that, we will be on 
the path to backing out oil and protecting the planet.
    I thank you, Mr. Chairman.
    Mr. Boucher. Thank you very much, Mr. Markey.
    The gentleman from Michigan, Mr. Rogers, is recognized for 
3 minutes.

  OPENING STATEMENT OF HON. MIKE ROGERS, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Rogers. Thank you, Mr. Chairman.
    I can't think of a more important topic that we have today 
than this. We are funding our enemy every day we stop at the 
pump and fill up with $120-a-barrel oil, and I think what we 
see today is part of our problem. This is a national security 
issue, it is an environmental security issue and it is an 
economic security issue, and we tend to hear mandate in a very 
singular focus by trying to pick the winner and loser of what 
is next. The example of the cell phones was interesting. I have 
one exception, that the marketplace got us to the BlackBerry. 
The marketplace invested research and development and took us 
to the next generation. It wasn't a government mandate that got 
us there. I think we have to be about cellulosic research but 
we should be on the R&D side and pushing it as fast and as 
furious as we can.
    I think we have got to go and say we are going to make a 
commitment to nuclear power. If you really want to impact 
prices in the future and have an environmental impact as well, 
we have to have a commitment to new nuclear power. We have to 
have substantial investments in new green auto technology and 
intelligent transportation systems so we can drive cars that 
use less oil and ride on smart roads that manage congestion 
with us. We have to invest in things like lithium ion 
batteries, the research and development side. We are so close, 
we are so close, but because we are so mandating and regulating 
here, we forgot that there are these other technologies out 
there that should be invested in all at the same time. We also 
need supplies of oil and natural gas from ANWR and the Outer 
Continental shelf. We can't fool ourselves to think that it is 
just the price of corn that is causing this problem for food. 
Diesel trucks are paying $4.50 a gallon for diesel. That is 
raising the costs on everything that we buy and consume.
    A new commitment to helping working Americans trade in 
their older automobiles for new fuel-efficient ones--3 percent 
of the cars out there are causing a tremendous amount of 
pollution out of the tailpipe. If we come up with a program to 
get them off the road, get them into new, more efficient cars, 
everybody wins, including automobile workers all across the 
country. An extension of solar and wind production credits 
without new taxes. The use of fuels like coal-to-liquids that 
are nearly ready for use in air travel but are being blocked by 
Congress.
    We have to have a holistic view on this, and I think we are 
coming at it exactly the wrong way. We are going to mandate 
winners and losers. We are going to manipulate the market price 
but our heavy regulation and mandates and what you can and 
can't use versus us stepping up and saying we are going to 
invest in the things that are going to make a difference for 
our national security, our environmental security, and our 
economic security. If we invest in the private industry and let 
that intellectual capital unleash on these problems from every 
perspective, from cellulosic to lithium ion batteries, to 
nuclear power, to new generation of solar and wind, we are 
going to win the fight. But if we don't do that, we will take a 
backseat to the rest of the world when it comes from leading 
the way on what I think can be new technology that gets us off 
of foreign oil, burns cleaner, and still protects the economy 
for working Americans.
    I appreciate the hearing, Mr. Chairman, and I hope we 
finally take a step back and say we need to do all things all 
at the same time to make a difference for the future of the 
country, and I yield back my time.
    Mr. Boucher. Thank you very much, Mr. Rogers.
    The gentlelady from California, Ms. Bono Mack, is 
recognized for 3 minutes. She is not here.
    The gentleman from Texas, Mr. Hall, is recognized for 3 
minutes.

 OPENING STATEMENT OF HON. RALPH M. HALL, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Hall. Mr. Chairman, I thank you.
    Ethanol is getting a lot of attention these days as the 
price of food increases and the renewable fuels standards 
mandate that is included in the Energy Independence and 
Security Act is getting the blame. I am not opposed to biofuels 
but I want us to be smart about them and I want us to realize 
that biofuels can't replace the gasoline and diesel that we use 
in our cars and planes, and I have mixed emotions about it. I 
guess I am a little like that candidate that didn't want to 
tell exactly where he stood on alcohol. He said that if you are 
talking about alcohol that smoothes men's tongues and 
intensifies conversations and alcohol that is in long-stemmed 
glasses that is used to toast success wherever it is found, I 
am certainly for it, and if you are talking about that alcohol 
that breaks up families and causes wrecks on the highway, I am 
against it, and I guess that is kind of the way I feel about 
corn and soybeans.
    According to environmental economic and energy costs and 
benefits of biodiesel and ethanol biofuels and the proceedings 
in the National Academy of Science's July 12, 2006, said, ``If 
all the current output of U.S. corn and soybeans were put into 
biofuels, it would replace only 12 percent of our gasoline 
demand and 6 percent of our diesel demands.'' I think biofuels 
ought to be part of the fuel mix but not to the detriment of 
the food supply for our country and the rest of the world.
    I look forward to the witnesses' testimony and it is folks 
that are going to come sit at those tables there that know more 
about it obviously than Members of Congress do. That is why we 
summon them up here and listen to them and type up and put into 
condensed form what their testimony is and extract and glean 
from that what is what Jeremy Bentham called the greatest good 
for the greatest number, and that is the way we are supposed to 
legislate. I look forward to the witnesses' testimony and the 
ongoing discussion about the important issues.
    Mr. Chairman, I thank you for having this session and I 
thank you for yielding me this time. I yield back.
    Mr. Boucher. Thank you very much, Mr. Hall.
    The gentleman from Arizona, Mr. Shadegg, is recognized for 
3 minutes.

OPENING STATEMENT OF HON. JOHN B. SHADEGG, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF ARIZONA

    Mr. Shadegg. Thank you, Mr. Chairman, and I want to thank 
you for holding this hearing and welcome our witnesses.
    A little over 4 weeks ago, Time magazine published this 
edition which says on the cover ``the clean energy myth,'' and 
then inside, and I thought it was interesting, introducing the 
very same article that says ``the clean energy scam.'' I am not 
convinced either of those are fair criticisms but certainly we 
need to be discussing these policies.
    In the latest energy bill, Congress drastically expanded 
the renewable fuels standard. In the latest iteration of the 
Farm Bill, we may see an extension of what I would view as 
excessive tax credits for biofuels and an extension of the 
import tariff on ethanol. These policies are clearly having at 
least some unintended consequences and the American people are 
not aware of them and I think they would be justifiably upset 
if they were. For example, there is a tax credit on biodiesel 
enacted by this Congress that is forcing Americans to pay 
millions of dollars, last year some $300 million, to subsidize 
diesel fuel prices overseas under a phenomenon known as flash 
and dash, and that is a procedure whereby biodiesel produced 
outside the United States is shipped to the United States. One 
percent of petroleum diesel is added to it, so you add 1 gallon 
to 100 gallons, and that fuel is then shipped back out of the 
United States with a $1-per-gallon subsidy paid by American 
taxpayers. So Americans are paying $1-a-gallon subsidy. It is 
interesting, you look at America exported millions of gallons 
of biodiesel last year more than we produced. How did that 
happen? Because under this policy, it pays to ship biodiesel to 
the United States, add 1 percent real diesel and ship it back 
out and get that $1-a-gallon subsidy. Clearly that is a policy 
that needs to be repealed.
    As we will hear later today, the current policies are 
causing an increase in food prices of as much as 35 percent. 
These hit some of the poorest populations in the world. 
Initially in my part of the country in Arizona, we saw a spike 
in tortilla prices in Mexico. Haitians are currently 
experiencing food prices which are 40 percent higher than 1 
year ago. Egg prices, milk prices, bread prices have all gone 
up. I think we can avoid these mistakes by letting the 
marketplace and not the government pick winners and losers. One 
of those I think would be a technology alternative fuels 
mandate which would allow us to take advantage of natural gas 
and displace a great deal of the petroleum we are currently 
burning in automobiles. That would also achieve a reduction in 
greenhouse gases of over 1.5 million metric tons for every 
billion gallons of gas not burned.
    I am also a cosponsor of Representative Herseth Sandlin's 
bill. In Arizona, we have a great deal of biomass which could 
be used but unfortunately in the definition of renewable in the 
most recent energy bill, much of that biomass cannot be used. 
We have a huge resource for that fuel in Arizona and it makes 
sense. I believe this is an important hearing to look at these 
policies when Americans are suffering by what they are paying 
at the pump.
    I thank you again, Mr. Chairman, for holding this hearing.
    Mr. Boucher. Thank you very much, Mr. Shadegg.
    The gentleman from Nebraska, Mr. Terry, has joined us here. 
He is not a member of the subcommittee. However, as a member of 
the full committee, we welcome him and would be happy to 
entertain any opening statement that he cares to make.

   OPENING STATEMENT OF HON. LEE TERRY, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF NEBRASKA

    Mr. Terry. I do appreciate that opportunity. Under the 
rules, you don't have to do that but I am pleased that you did.
    I appreciate that you had this hearing today because I 
think there is a lot of misinformation or exaggerations about 
the impact of biofuels upon the world as we know it today. I 
hope the goal here today, as I expect it is, is that we have 
our esteemed blue ribbon panel of witnesses here to put the 
facts before us so that the American public can make and we can 
make informed decisions on whether or not to alter a renewable 
fuels mandate.
    My perception when I have read studies from universities 
and the Federal government is that there is definitely an 
impact of using corn to create ethanol, but that it is more 
equivalent to the acorn falling and hitting us on the head than 
the sky is falling that I am reading. Or the editorial cartoons 
that in drought-ridden areas were somehow caused by the few 
percent more of corn used last year for ethanol, is somehow 
causing the famine and drought in Asia and other parts of the 
country. That is the type of hysteria that I think we need to 
kind of remove from our discussions about the biofuels mandate.
    My vision, and I think the vision shared by our first 
panelist, I think she has got the right focus here, is that 
biofuels are going to have to be part of our energy portfolio. 
As we look to become less dependent on foreign countries to 
fuel our economy, to make sure that we can grow our crops, to 
get to work, to generate electricity, that we have to have a 
more varied, diverse portfolio and that is going to include 
biofuels, and then within that it is going to be varied. I can 
envision that you use one type of biomass in the Southeast and 
a different one in the Midwest and another one in the Southwest 
and another one in the Northwest and maybe a different one in 
the Northeast. I think when we can really put our research into 
what would be the ideal sustainable biomass in our respective 
regions and then set up pilot plants so we go from the Shimkus 
1980s cell phone to the BlackBerry because that is what we have 
to do is get from generation one to generation two, three, four 
where the process will be efficient and affordable.
    So hopefully we can keep on the track because it is 
necessary that we do, and Mr. Chairman, and I thank you for 
allowing me time to speak.
    Mr. Boucher. Thank you, Mr. Terry.
    We now welcome our first witness of the morning and would 
ask that she come to the witness table. Stephanie Herseth 
Sandlin is the Representative of the State of South Dakota. She 
is also the chief sponsor of H.R. 5236, which has been 
referenced by many members of the panel in their opening 
statements. They are serving as cosponsors of her legislation. 
The legislation she has introduced would qualify woody biomass 
taken from Federal lands as a feedstock that could qualify for 
the mandate for renewable fuels contained in our 2007 law.
    So Ms. Herseth Sandlin, we are delighted to have you with 
us this morning. Your prepared written statement will be made a 
part of the record, and we welcome your oral summary.

 STATEMENT OF HON. STEPHANIE HERSETH SANDLIN, A REPRESENTATIVE 
           IN CONGRESS FROM THE STATE OF SOUTH DAKOTA

    Ms. Herseth Sandlin. Chairman Boucher, Ranking Member 
Upton, and members of the subcommittee, thank you for the 
opportunity to discuss the new renewable fuels standard enacted 
as part of the Energy Independence and Security Act of 2007.
    With the increase in the RFS included in the energy bill, 
we are moving aggressively to take advantage of the 
contribution agricultural producers across the Nation can make 
to our national security, our energy economy, and our 
environment. Through an increase in biofuels production, we can 
reduce our dependence on foreign oil, revitalize rural 
economies, and decrease our overall carbon emissions at the 
same time.
    Because we are in the beginning stages of developing 
biofuels as a reliable domestic source of energy, it is 
essential for Congress to sustain its support for ethanol 
production as a way of fostering the development of advanced 
biofuels. We expect these advanced biofuels to utilize a 
diversified set of cellulosic feedstocks from corncobs to 
prairie switchgrass to wood waste.
    While inclusion of a forward-looking RFS in the energy bill 
was great news for many renewable energy producers across the 
Nation, late in the process an unfortunate provision was added 
that prohibits virtually all woody biomass from national 
forests including the Black Hills National Forest in South 
Dakota from being counted toward the expanded renewable fuels 
standard. The definition also excludes all biofuels made from 
biomass from private sources unless it comes from those trees 
that are planted in a plantation and actively managed, which 
could potentially exclude most woody biomass on private 
property.
    I think this is a misguided policy that squanders what 
could be an important source of renewable homegrown energy. It 
is a wrongheaded disincentive to use an available cellulosic 
feedstock. It simply doesn't make sense.
    That is why I have introduced a bipartisan bill, H.R. 5236, 
the Renewable Biomass Facilitation Act, which revises the 
definition of renewable biomass to allow federally sourced 
biomass and that would include trees, wood, brush, thinnings, 
chips, and slash that is removed as a result of approved 
preventive treatments to count toward the renewable fuels 
mandate, provided it is used for the production of biofuels. 
Approved preventive treatments include reducing hazardous 
fuels, minimizing or containing disease or insect infestation, 
and restoring ecosystem health.
    H.R. 5236 does not alter Federal forest management policy. 
In fact, the bill, if enacted, could help foster responsible 
public forestland management by supporting efforts to reduce 
the incidence of destructive wildfires. The altered definition 
simply means that these forest byproducts which would otherwise 
not be used or perhaps, in the case of slash piles, simply be 
burned, thereby releasing more carbon in the air or allowed to 
rot, releasing methane into the air, are instead able to be 
counted toward the renewable fuels standard if used to produce 
biofuels.
    The bill would also allow virtually all private land 
biomass that is used as a feedstock for biofuels to count 
toward the mandate.
    The bill language is identical to the language included in 
the Senate version of the Farm Bill, which passed that chamber 
by a vote of 79 to 14.
    I am proud to say that the 25 x '25 Coalition and the 
Society of American Foresters have written to Chairman Dingell 
and Ranking Member Barton expressing their concern with the 
energy bill's definition and urging the committee's 
consideration of H.R. 5236 as a remedy, and Mr. Chairman, I 
would ask unanimous consent to include those letters into 
today's hearing record.
    Mr. Boucher. Without objection.
    [The information appears at the conclusion of the hearing.]
    Ms. Herseth Sandlin. Earlier this year I got an exciting 
firsthand view of the present and future of woody biomass 
feedstocks when I visited my constituent KL Process Design 
Group's pioneering wood waste ethanol production facility in 
Upton, Wyoming, not far from KL's headquarters in Rapid City, 
South Dakota. KL, also testifying today, uses woody biomass, 
some of which has been removed from federally owned forestland, 
to produce cellulosic ethanol, and I have discussed with KL its 
concerns with the renewable biomass definition.
    Importantly, I heard the very same concerns when I hosted a 
roundtable discussion in Rapid City, South Dakota, with a group 
including forestry product industry leaders and representatives 
from the Black Hills National Forest. I listened carefully to 
the participants because they rely and depend on the forest for 
their livelihood. Many of them were puzzled why our Nation, 
when it is supporting the development of alternative energy, 
would purposely exclude a feedstock that is a byproduct of 
existing forestry practices. They pointed out that leaving 
slash piles to rot or burning them leads to negative 
environmental effects that far outweigh any benefit gained when 
waste returns to soil. They would like to participate in the 
renewable energy movement the energy bill fosters and they have 
no interest in turning the Black Hills into a so-called fuel 
farm. It is my firm opinion that the forest planning process 
followed by the U.S. Forest Service will appropriately protect 
against such a development.
    In conclusion, by amending the definition of renewable 
biomass in keeping with H.R. 5236, we can put sound policy 
support in place for the development of cellulosic ethanol so 
crucial to meeting the new RFS. I commend to the Committee and 
all observers the testimony and experience of KL Design 
Products, which speaks to the potential that exists here. If we 
fail to realize this tremendous potential for advanced 
biofuels, we could fail once again to take every responsible 
measure to wean ourselves from dependence on foreign oil.
    Thank you, Mr. Chairman.
    [The prepared statement of Ms. Sandlin follows:]

              Statement of Hon. Stephanie Herseth Sandlin

    Chairman Boucher, Ranking Member Upton, and Members of the 
Committee, thank you for the opportunity to discuss the new 
Renewable Fuel Standard (RFS) enacted as part of the Energy 
Independence and Security Act of 2007.
    With the increase in the RFS included in the Energy Bill, 
we are moving aggressively to take advantage of the 
contribution agricultural producers across the nation can make 
to our national security, our energy economy and our 
environment. Through an increase in biofuels production, we can 
reduce our dependence on foreign oil, revitalize rural 
economies, and decrease our overall carbon emissions at the 
same time.
    Because we are in the beginning stages of developing 
biofuels as a reliable domestic source of energy, it is 
essential for Congress to sustain its support for ethanol 
production as a way of fostering the development of advanced 
biofuels. We expect these advanced biofuels to utilize a 
diversified set of cellulosic feedstocks, from corn cobs to 
prairie switchgrass to wood-waste.
    While inclusion of a forward-looking RFS in the Energy Bill 
was great news for many renewable energy producers across the 
nation, late in the process an unfortunate provision was added 
that prohibits virtually all woody biomass from national 
forests, including the Black Hills National Forest in South 
Dakota, from being counted towards the expanded RFS.
    The definition also excludes all biofuels made from biomass 
from private sources unless it comes from those trees that are 
``planted'' in a ``plantation'' and ``actively managed,'' which 
could potentially exclude most woody biomass on private 
property.
    I think this is a misguided policy that squanders what 
could be an important source of renewable, homegrown energy. It 
is a wrong-headed disincentive to use an available cellulosic 
feedstock. It simply doesn't make sense.
    That's why I've introduced a bipartisan bill, H.R. 5236, 
the Renewable Biomass Facilitation Act, which revises the 
definition of "renewable biomass" to allow federally sourced 
biomass - and that would include trees, wood, brush, thinnings, 
chips, and slash--that is removed as a result of approved 
preventive treatments--to count toward the renewable fuels 
mandate, provided it's used for the production of biofuels. 
Approved preventive treatments include reducing hazardous 
fuels; minimizing or containing disease or insect infestation; 
and restoring ecosystem health.
    H.R. 5236 does not alter federal forest management policy. 
In fact, the bill, if enacted, could help foster responsible 
public forestland management by supporting efforts to reduce 
the incidence of destructive wildfires. The altered definition 
simply means that these forest byproducts, which would 
otherwise not be used, or perhaps, in the case of slash piles, 
simply be burned--thereby releasing more carbon in the air--are 
instead able to be counted toward the Renewable Fuels Standard 
if used to produce biofuels.
    The bill would also allow virtually all private-land 
biomass that is used as a feedstock for biofuels to count 
toward the mandate.
    The bill language is identical to the language included in 
the Senate version of the Farm Bill, which passed that chamber 
by a vote of 79 to 14.I'm proud to say the 25 by `25 Coalition 
and the Society of American Foresters have written to Chairman 
Dingell and Ranking Member Barton, expressing their concern 
with the Energy Bill's definition and urging the Committee's 
consideration of H.R. 5236 as a remedy.
    Earlier this year, I got an exciting first-hand view of the 
present and future of woody biomass feedstocks when I visited 
my constituent KL Process Design Group's pioneering wood-waste 
ethanol production facility in Upton, Wyoming, not far from 
KL's headquarters in Rapid City, South Dakota. KL, also 
testifying today, uses woody biomass that has been removed from 
federally-owned forest land and I have discussed with KL its 
concerns with the renewable biomass definition.
    Importantly, I heard the very same concerns when I hosted a 
roundtable discussion in Rapid City, South Dakota with a group 
including forestry product industry leaders and representatives 
from the Black Hills National Forest.
    I listened carefully to the participants because they 
depend upon the forest for their livelihood. Many of them were 
puzzled why our nation--when it's supporting the development of 
alternative energy--would purposely exclude a feedstock that is 
a byproduct of existing forestry practices.
    They pointed out that leaving slash piles to rot--or 
burning them--leads to negative environmental effects that far 
outweigh any benefit gained when waste returns to soil. They 
would like to participate in the alternative energy movement 
the Energy Bill fosters, and said they had no interest in 
turning the Black Hills into a ``fuel farm.''
    By amending the definition of ``renewable biomass'' in 
keeping with H.R. 5236, we can put sound policy support in 
place for the development of cellulosic ethanol so crucial to 
meeting the new RFS. I commend to the committee and all 
observers the testimony and experience of KL Design Products, 
which speaks to the potential that exists here. If we fail to 
realize this tremendous potential for advanced biofuels, we 
could fail, once again, to take every responsible measure to 
wean ourselves from dependence on foreign oil. Thank you.
                              ----------                              

    Mr. Boucher. Thank you very much, Ms. Herseth Sandlin, and 
we look forward to Mr. Kramer's testimony on our third panel 
this afternoon.
    I just have one question of you. Could you focus for just a 
moment on your definition of the woody biomass that would 
qualify for the renewable fuels standard? Is there any 
restriction on the kind of biomass that can be taken out of the 
national forest under your bill for that purpose? Would it be 
limited, for example, to biomass that is harvested out of the 
forest for other purposes?
    Ms. Herseth Sandlin. It is consistent--it would be 
consistent with the forest plan for that particular forest, so 
it puts no additional restrictions other than the types of 
practices for addressing the urban-wild land interface and the 
thinning projects that are conducted by the U.S. Forest 
Service, the slash piles that remain in light of those thinning 
projects. Again, anything that is an approved preventive 
treatment again for reducing hazardous fuels, for addressing 
insect infestations would be allowed to count toward the RFS if 
used for biofuels production.
    Mr. Boucher. Thank you very much. Well, I personally think 
you have made a compelling case for your measure, and I thank 
you for being here to do that this morning.
    The gentleman from Michigan, Mr. Upton.
    Mr. Upton. Well, thank you. I think you have made a 
compelling case also and I thought I would tell you 
particularly, even before you said Upton, Wyoming. You can add 
my name as a cosponsor to your bill. I look forward to working 
with you and obviously keeping it bipartisan. Thank you for the 
nice job.
    I yield back.
    Ms. Herseth Sandlin. Thank you.
    Mr. Boucher. Thank you, Mr. Upton.
    Let me just ask if anyone does have questions they would 
like to propound to Ms. Herseth Sandlin. Mr. Hall, do you have 
a question?
    Mr. Hall. I would like to make a brief statement and 
welcome her as a Member of Congress and giving us the 
intelligent thrust of your bill. It sounds very good to me, and 
I am honored to have you as almost a Texan in that you married 
one of my very best friends, a guy I admire very much, and you 
are welcome.
    Mr. Boucher. Thank you, Mr. Hall.
    Do other members have comments or questions for our 
witness?
    Well, Ms. Herseth Sandlin, with the committee's thanks, you 
are excused, and we will try to treat your measure with tender 
care.
    We now welcome to the subcommittee our second panel, which 
consists of one witness, and that is Mr. Bob Meyers, the 
principal deputy assistant administrator with the Office of Air 
and Radiation for EPA. Mr. Meyers is also a former committee 
counsel for this committee, who provided very distinguished 
service during his years here, and Mr. Meyers, we welcome you. 
Without objection, your prepared written statement will be made 
a part of the record, and we would welcome your oral summary.

   STATEMENT OF ROBERT J. MEYERS, PRINCIPAL DEPUTY ASSISTANT 
  ADMINISTRATOR, OFFICE FOR AIR AND RADIATION, ENVIRONMENTAL 
                       PROTECTION AGENCY

    Mr. Meyers. Thank you, Mr. Chairman. I appreciate the 
opportunity to testify today regarding issues of implementation 
and opportunities attendant to the renewable fuels standard.
    As you know, renewable fuels are a key element of our 
Nation's strategy for addressing the serious challenge of 
global climate change. In his 2007 State of the Union address, 
the President proposed to reduce gasoline consumption by 20 
percent through increased use of renewable and alternative 
fuels and through the promulgation of new vehicle efficiency 
standards. Although Congress did not enact all aspects of the 
President's Twenty in Ten plan, it did approve new renewable 
fuel and fuel economy standards as part of the Energy 
Independence and Security Act of 2007.
    As the chairman noted, when Congress approved the RFS 
program as part of the 2005 energy bill, the Environmental 
Protection Agency was charged with drafting regulations and 
implementing the new program. This responsibility was 
maintained in the 2007 energy law. Under Administrator 
Johnson's direction now, we are conducting a broad outreach 
effort to discuss programmatic issues with multiple 
stakeholders regarding the implementation of the 2001 energy 
law. We have had numerous meetings, starting in January, less 
than a month after the enactment of EISA, and we have talked to 
individual refiners, refiner organizations, biofuel producers, 
feedstock providers, fuel distributors, downstream marketers, 
technical experts, and major environmental groups, and I would 
say active discussions and informational exchanges are also 
ongoing right now. EPA is also working very closely with our 
Federal partners, the Department of Energy, Department of 
Agriculture, and others, to go beyond the direct consultative 
roles that were contained in the legislation and to take 
advantage of external expertise and analytical capability.
    In this regard, we are certainly mindful of the present 
discussion and public debate on the matter of food versus fuel. 
Last week the chief economist for the Department of Agriculture 
provided testimony to the Joint Economic Committee concerning 
the national and global increase of food prices and his 
analysis of the various factors involved. I am not going to 
provide any further illumination on his testimony but I would 
note that our economic analysis to accompany the RFS rule will 
include an extensive review of the effects of the mandate on 
commodity prices, food prices, exports, cattle feed, and other 
factors.
    In addition, I would note, as has been noted already in 
this hearing, that the Agency has received several requests 
related to our waiver authority including the specific request 
by the governor of Texas for EPA to waive 50 percent of the 
mandate for the production of ethanol derived from grain. In 
response, it is our intent to shortly issue a Federal Register 
notice on this matter and establish a docket to receive public 
comments. EPA is required under the Clean Air Act to approve or 
disapprove a State petition within 90 days of receiving it.
    Overall, as the subcommittee well appreciates, EISA made 
significant changes in the RFS program and developing and 
implementing regulations for these provisions will require 
careful evaluation and considerable new analysis. I will just 
briefly go through parts of the bill, but first, as already 
mentioned, EISA increased the total renewable fuel volume 
approximately fivefold over the 2005 energy bill while 
extending the statutory schedule by 10 years. Second, EISA 
extended the RFS program to include both on-road and non-road 
gasoline and diesel fuel volumes. This change may affect new 
parties possibly including a number of small businesses. Third, 
EISA increased the number of renewable fuel categories and 
standards to a total of four including total renewable fuel and 
three new subcategories, each with its own required minimum 
volumes: advanced biofuels, biomass-based diesel and cellulosic 
fuels. Fourth, new provisions that are included in EISA require 
EPA to apply life cycle greenhouse gas performance standards to 
each category of renewable fuel. The agency in coordination 
with DOE and USDA has done a substantial amount of work on life 
cycle analysis over the past year. However, even with the 
advances that we have already made, additional new and improved 
analysis will be necessary. And fifth, EISA adds a number of 
other new provisions including changing the definition of 
renewable fuel feedstocks. Developing appropriate enforceable 
regulations on this provision is also going to require 
extensive dialog with our interagency colleagues as well as 
stakeholders.
    Finally, as required also by Congress, we will be assessing 
the impacts of EISA on vehicle emissions, air quality, 
greenhouse gases, water quality, land use and energy security. 
We believe these analyses will provide important information to 
the public and Congress on the effectiveness of the new 
legislation.
    I will stop there and be available for any questions.
    [The prepared statement of Mr. Meyers follows:]


    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Mr. Boucher. Thank you very much, Mr. Meyers. You probably 
heard the testimony of our previous witness, Representative 
Herseth Sandlin, concerning her legislation which would qualify 
woody biomass taken from Federal lands for the renewable fuel 
standard, and I have just a couple of questions for you 
concerning that. Do you believe that EPA has the flexibility 
under current law to provide for the permissibility for the use 
of woody biomass coming from Federal lands under the renewable 
fuel standard?
    Mr. Meyers. Mr. Chairman, that is an issue in front of us 
in terms of the implementation of the legislative language but 
the legislative language refers directly to non-Federal.
    Mr. Boucher. Well, so what is your conclusion from that?
    Mr. Meyers. The face of the language would prove difficult 
to not obey.
    Mr. Boucher. So if I can paraphrase that, you haven't made 
a final decision yet but you would say that it may pose 
difficulty for you to qualify woody biomass coming from Federal 
lands, given the----
    Mr. Meyers. It would certainly be challenging.
    Mr. Boucher. Given the statutory language. OK. You have a 
number of requests for waivers of the mandate for a certain use 
of renewable fuels in the Nation's transportation fuel supply, 
one prominent one coming from the governor of Texas, I think, 
and the statute says that you have 90 days from the receipt of 
that request for a waiver to either grant or deny the waiver. 
You received that, I think, at some point in April, did you 
not?
    Mr. Meyers. Just recently within about the last week.
    Mr. Boucher. So toward the end of April you would have 
received that?
    Mr. Meyers. Yes.
    Mr. Boucher. Will you be able to act within that 90-day 
period? Will you make that deadline?
    Mr. Meyers. Well, we are certainly making every attempt to 
comply with the dictate of the statute. As I mentioned, we will 
be going out very soon with a notice to offer up the public 
comment period. That is also required in the legislation. The 
legislation says we should approve or deny within 90 days, 
therefore, contemplation is to have a 30-day public comment 
period attendant to the request from the State of Texas.
    Mr. Boucher. And so you are moving rapidly to put that 
public comment into effect. Is that correct?
    Mr. Meyers. Yes, we are. There are certain delays in terms 
of getting things published in the Federal Register and 
certainly we need to have the statutory public comment period 
to comply with the statute but we are moving very quickly.
    Mr. Boucher. OK. Well, we will watch with interest your 
deliberations on that question and would encourage you to meet 
that 90-day deadline for making a decision.
    Under the 2007 law, there is a new life cycle greenhouse 
gas emissions standard that applies to biofuels, and 
specifically what it says is that for facilities for which the 
construction begins after the effective date of the law, 
meaning after December of last year, the life cycle greenhouse 
gas emissions for the fuels from that facility would have to be 
more beneficial than the life cycle greenhouse gas emissions 
that come from the petroleum that that biofuel displaces. Now, 
obviously the way that is structured, that better-than-
petroleum carbon footprint would not apply to the corn-based 
ethanol refineries that either were in operation or under 
construction as of December of last year, and my question to 
you is, let us suppose that an owner of one of those refineries 
wanted to expand its size. Would that expansion be subject to 
the life cycle greenhouse gas emission requirements of the 2007 
law?
    Mr. Meyers. That is one of the questions, sir, that we are 
looking at in the road ahead in looking at the provisions of 
the statute and implementation. I think basically the question 
is, if a facility had a major modification, would that still 
count, and I think that is one of the issues we have not 
decided on. We have been talking to a lot of stakeholders and 
certainly would be part of our discussion on the proposed rule.
    Mr. Boucher. And so you have that issue under 
consideration. All right, Mr. Meyers. That concludes my 
questions.
    The gentleman from Michigan, Mr. Upton.
    Mr. Upton. Thank you again, Mr. Chairman.
    I want to follow up on the chairman's question as it 
related to biomass. I know that the President in 2007, January, 
wanted to include an expansion of the RFS to include 
alternative fuels such as coal-to-liquid, something that Mr. 
Shimkus and Mr. Boucher have authored and I have cosponsored, 
compressed natural gas. Would the Administration, do you think, 
be open now to an expansion of the RFS to include those two in 
addition perhaps to the woody biomass? It just seems to me that 
they would be a good thing, at least from my perspective, to 
move forward.
    Mr. Meyers. Well, you are correct in terms of what the 
Administration's bill included. It did include alternative 
fuels as otherwise defined in existing EPAct legislation. So 
that was the policy of the Administration. I would say as a 
general matter, the policy of the Administration with respect 
to specific new legislation is something we would decide on a 
case-by-case basis through the interagency process, so I 
wouldn't be able to speculate but certainly it was part of the 
Administration's previous position.
    Mr. Upton. Would there be--as you study this issue 
including the woody biomass, it is something that you might be 
likely to come to a decision on within the next number of 
months?
    Mr. Meyers. I am sure that the Administration would 
consider any legislation moving through Congress and be 
involved with the discussion with the committees of 
jurisdiction on this.
    Mr. Upton. Now, EPA just reduced the ozone national ambient 
air quality standards. What are the ozone air quality impacts 
of large increases of ethanol and biodiesel consumption? Was 
that taken into consideration?
    Mr. Meyers. Well, our last analysis of that occurred when 
we promulgated the 2005 regulations based on the 2005 statute. 
What we showed was a mixture of effects based on the 7.5 
billion gallons and some limited air quality modeling that we 
did to judge those effects. We saw some pollutants like 
particulates go down. We did see some increases in nitrous 
oxides, which are a precursor to ozone. They were not large on 
a great scale but there were some increases in NOx 
from that modeling.
    Mr. Upton. So it is somewhat of a negative reaction as it 
related to ozone?
    Mr. Meyers. We will be doing--we will be refining our 
analysis on the new bill, on the basis of the new bill 
analyzing that on a going forward basis so that is one of the 
things we are looking at. Again, some other pollutants, some 
air toxics go down as well as particulate matter, and other 
emissions like CO are also decreased. It depends. One thing to 
remember is that we have different fuels. We have ethanol and 
we also have biodiesel, which have different effects, and this 
bill also incentivizes directly biodiesel that the previous 
bill did not.
    Mr. Upton. Now, has the EPA studied the requirements in the 
RFS in the context of the real-world fuel availability, 
particularly as it relates to what the situation is today and 
what is coming forth in the legislation that the President 
signed?
    Mr. Meyers. We will be looking at things such as the energy 
security impact of the legislation on the United States, which 
does involve an assessment of the global oil environment.
    Mr. Upton. Thank you, Mr. Chairman.
    Mr. Boucher. Thank you very much, Mr. Upton.
    The gentlelady from Wisconsin, Ms. Baldwin, is recognized 
for 5 minutes.
    Ms. Baldwin. Thank you for your testimony today. I wanted 
to start by inquiring a little bit more about the process that 
EPA will be engaging in as you consider the waivers. 
Specifically, it is my understanding that EPA is going to 
evaluate whether full implementation of the RFS would severely 
harm the economy or environment of the State or region of the 
United States in terms of your statutory directive under the 
Clean Air Act or whether there is an adequate domestic supply, 
and I am kind of interested how you think you are going to 
define severe economic harm, and I know I am asking you to 
anticipate the future and you will have a lot of assessments 
and analysis but what sort of factors will you be looking at? 
Will it be beyond the energy markets to the food price issues, 
et cetera? Please elaborate a little bit for me.
    Mr. Meyers. Sure. I first would want to clarify that we 
would not be looking at full implementation of the RFS. Full 
implementation of the RFS generically would be in the year 
2022. The waiver request we have right now is for essentially 
the current year and has been filed under the previous 2005 law 
since the new waiver authorities are not now effective under 
the law. So we would be looking at the more immediate effects, 
the effects cited in the governor's letter to the EPA.
    As for the standard of severe economic or environmental 
harm, that is a new standard that was first placed into the 
Clean Air Act in 2005 as part of that legislation. This would 
be a case of first impression for the Agency. We do not have 
comparable standards within the Act for severe economic or 
environmental harm so as far as I know, we have never 
interpreted that statutory standard before.
    Ms. Baldwin. Well, I guess I am looking ahead at how you 
think you will be approaching that case of first impression in 
terms of those definitions.
    Mr. Meyers. Well, that would be part--we will be soliciting 
comment, public comment on whether or not the information 
submitted to the Agency would constitute severe economic harm, 
which the basis of the letter in front of us was mostly 
economic. It was not--we did not receive information so far 
from the State of Texas regarding environmental issues 
directly. But we will have to essentially give full faith and 
credit to the statute as written and make a reasonable 
determination based on that language. Again, with cases of 
first impression, I am very hesitant to project how the Agency 
would interpret those terms.
    Ms. Baldwin. Switching to a different topic, I would really 
like to hear your assessment of the ability of advanced biofuel 
technologies to meet the timing and production volumes of the 
RFS mandate, and as we move to third-generation technologies, I 
wonder what you see as the primary feedstocks for these 
technologies.
    Mr. Meyers. Well, our work on this issue has been done by 
the Department of Energy so I am not as familiar with the 
research but I think a lot of different feedstocks are being 
used and looked at in terms of cellulosic development, 
including things you hear quite a bit about switchgrass and the 
aforementioned forest thinnings, different feedstocks would be 
readily available and essentially fit the profile for 
production where you need to move a lot of mass to the 
facility. Most corn-based ethanol facilities now get most of 
their feedstocks within about 30 miles or so from the facility 
so you need to have the feedstock available in the immediate 
vicinity and have transportation infrastructure to get it 
there. So I think our impression too is that obviously things 
the private marketplace is looking at right now is using the 
other parts of the corn, the husk and the stalk and other 
things, and that may be the first penetration for non-kernel-
based ethanol. But we would be happy to provide more 
information for the record. We have the Office of Research and 
Development working on these issues and I would greatly like to 
provide information from that office also.
    Ms. Baldwin. Great. I see I am almost out of time. You 
mentioned in answer to that question a concern about how far 
the feedstocks travel to the point of production. I have a real 
interest in--we had an amendment to the Energy Independence and 
Security Act relating to the adequacy of our transportation 
infrastructure to get the product to market after production, 
and I don't think I have time to ask a question on that but 
that is something that we really have to be vigilant about.
    Mr. Meyers. Clearly, Congresswoman, if I have the 
opportunity, we are looking at those issues. It is one thing to 
look at the production and capacity of the ethanol industry. It 
is quite another thing to look at the ability to blend it in 
all markets through the current transportation system and with 
the current economics of that.
    Mr. Boucher. Thank you very much, Ms. Baldwin.
    The gentleman from Texas, Mr. Barton, is recognized for 5 
minutes.
    Mr. Barton. Thank you.
    It is good to have you back, Mr. Meyers. Can a 9-billion-
gallon mandate in current law for renewable fuels be met this 
year?
    Mr. Meyers. Well, information from the Agency would 
indicate that there is sufficient capacity to produce more than 
the 9 billion. The issue, I think I referenced in the last 
question was, is transportation and blending. We are monitoring 
the situation right now. We don't have any information that 
would indicate that it will not be able to be met for this 
current year.
    Mr. Barton. So you say it will be met?
    Mr. Meyers. I can't say definitively it will be met. I say 
we don't have the information now in front of the Agency that 
would indicate----
    Mr. Barton. If it is not met, do you have sufficient 
authority under law to grant waivers to alleviate the 
situation?
    Mr. Meyers. There are certainly a number of waivers. The 
2005 energy law which you were very instrumental in provided 
waivers and additionally the new law provides additional waiver 
authority. There are also waiver authorities outside of the 
Clean Air Act that are applicable. Section 1541 of the energy 
bill passed in 2005----
    Mr. Barton. So the answer is yes?
    Mr. Meyers. Yes.
    Mr. Barton. What is the definition that the EPA is using 
for greenhouse gas to implement this bill?
    Mr. Meyers. The statute itself provides the definition of 
greenhouse gases as the six Kyoto gases plus the additional 
ones that the administrator finds would meet the----
    Mr. Barton. What are the six Kyoto gases?
    Mr. Meyers. Well, broadly, carbon dioxide, methane, nitrous 
oxides, and then we have the fluorinated gases, 
perfluorocarbons----
    Mr. Barton. But water is not one of them, even though it is 
the most prevailing greenhouse gas?
    Mr. Meyers. Water is not currently defined in the Kyoto 
Protocol or the statute.
    Mr. Barton. So you don't have to consider water vapor?
    Mr. Meyers. No, we don't have to. We have the discretion 
under law to include other gases.
    Mr. Barton. But water vapor is the most prevailing 
greenhouse gas?
    Mr. Meyers. Water vapor certainly has an effect on climate. 
That has been documented by the IPCC and our own analysis, yes.
    Mr. Barton. How does the EPA intend to model requirements 
for life cycle greenhouse gas reductions? That is an artful 
term.
    Mr. Meyers. We have been working on this for some time and 
most intensely in the last year. We have used a model developed 
initially by the Department of Energy, the GREET model. 
Essentially we look at direct inputs into production of the 
fuel, you know, through transportation system and the different 
processes involved in the production of the fuel and the 
infrastructure that is made. So it is a fairly complex model. 
It has been under development and revision for several years.
    Mr. Barton. Will the EPA eventually create a mathematical 
model that is replicable?
    Mr. Meyers. Well, I believe the GREET model is replicable 
now and I think it may be available publicly--I could check on 
that--to be used by others so the model itself is----
    Mr. Barton. But my point is, at some point in time to 
implement the Act, you have to have a way for ordinary people 
who are trying to conform to the Act, comply with it, to plug 
in production numbers and output numbers and compare apples to 
apples, in this case, emissions to emissions.
    Mr. Meyers. That is true, and I think transparency is a 
part of the process we should keep in mind as we go forward so 
our results are replicable. But the Act essentially 
contemplates that the Agency will do the calculations and 
establish them through the regulations. Once they are 
established, then the law then further says they should be 
stable until there is essentially new methodology available. So 
we need to follow the provisions----
    Mr. Barton. Well, let me ask you a hypothetical. Under your 
definition of a greenhouse gas, you included methane. Cows emit 
methane.
    Mr. Meyers. Correct.
    Mr. Barton. If rising corn prices result in fewer cows, 
that is a net reduction in methane. In your life cycle analysis 
then, would that be considered a net reduction in greenhouse 
gas emissions?
    Mr. Meyers. Well----
    Mr. Barton. Would it have the perverse effect of higher 
prices resulting in fewer cattle produced, which would on paper 
have the benefit of less methane being--so it would be 
mathematically a net improvement in greenhouse gas emissions.
    Mr. Meyers. There will be some challenges interpreting the 
statute. I tried to make those available. But essentially, 
Congressman, we are----
    Mr. Barton. I mean, it is not a frivolous question.
    Mr. Meyers. No, it is not at all, and we are charged with 
looking at both direct and indirect emissions, so----
    Mr. Barton. My time is expired. I have got one final 
question. In the letter that Governor Perry sent to the EPA on 
April 25, he says that based on an expected average cost per 
bushel of corn in the Texas market in 2008 of $8 a bushel, that 
is going to have a negative impact to Texas cattle producers of 
almost $4 billion. Do you consider that to be severe economic 
harm?
    Mr. Meyers. Mr. Barton, that would be tantamount to my 
deciding the issue before we receive public comment so I would 
respectfully demur on the question. We will certainly take all 
the information that Texas has provided us and analyze it and 
ask for comment. Again, the standard itself is entirely new in 
the Clean Air Act and we need to be respectful that we have 
interpreted----
    Mr. Barton. Thank you, Mr. Chairman. Thank you, Mr. Meyers.
    Mr. Boucher. Thank you very much, Mr. Barton.
    The gentleman from Texas, Mr. Gonzalez, is recognized for a 
total of 8 minutes.
    Mr. Gonzalez. Thank you very much, Mr. Chairman.
    Welcome, Mr. Meyers. Quickly, I am going to reference what 
the ranking member was talking about. That is Governor Perry's 
letter. When it first came out, it was an article in the San 
Antonio paper so I tried to figure out what exactly he is 
asking, what is the application. So the question comes down to, 
how realistic a request it is. On page 2 of his letter he says, 
``My request is for a waiver of 50 percent of the mandate for 
the production of ethanol derived from grain,'' but this is not 
Texas specific. You can't take this one State, segregate it 
from the others in reference to the nationwide mandate. I asked 
the question of my staff and I believe the answer he got from 
someone, I am not sure if it was with the department or agency, 
was that no, you don't segregate Texas. It is a 50 percent 
request across the board mandate applicable to the United 
States. Is that the way you interpret it? I am trying to figure 
out what he is asking.
    Mr. Meyers. The face of the request asks for 50 percent 
reduction, I think, in grain produced part of the mandate. I am 
paraphrasing. Most of it is now satisfied by grain, although 
some of the biodiesel might not fit in that category. But the 
waiver mechanism we are talking about refers back to the 
applicable volume, which is the national standard.
    Mr. Gonzalez. So what he is asking is basically maybe Texas 
specific as to the economic condition that it may wrought but 
the solution is a 50-State solution if applied. Would that be 
correct?
    Mr. Meyers. That is something we will be also examining and 
looking for comment on. The Act is not entirely clear as to--
although the effect can be at a sub-national level, the way it 
was written in 2005, the governors can request it based on 
State, region, or the United States. Congress retained that in 
the 2007 law while allowing further parties to also bring such 
a petition. But the effect can be more localized but I guess 
the remedy refers back to the national standard.
    Mr. Gonzalez. That is going to be tough. Now, you heard Mr. 
Upton make reference to a piece of legislation that I have 
joined him in sponsoring, and that is doing something about the 
mandate situation that occurs or is occurring and specifically, 
let us say California that has a certain percentage limitation 
on the use of the ethanol blend. We are talking about now the 
refiners, the blend and such, not necessarily the 
transportation issue, which you have mentioned, which is huge, 
but nevertheless, you have waivers and such but if you--I am 
not asking you to endorse and promote the piece of legislation 
but really, it has to deal with the carry-over provision. You 
still will meet the targets at the end but when you extend the 
carry-overs, because the way they are written presently, it 
makes it almost impossible for the refiners to meet the mandate 
regarding the restrictions from certain States that are already 
in place, even though they may be increasing the amounts of the 
ethanol blend, it still will not be in the way of timeliness in 
meeting the mandates. Is a legislative remedy one of those 
avenues rather than just what might be available in the way of 
waiver?
    Mr. Meyers. Well, as mentioned, there are other waivers 
other than the one that was specifically the subject of the 
governor for the State of Texas request. But referencing the 
availability of credits, the language from the 2005 Act, which 
limited credit life essentially to 12 months, remained in 2007 
so we interpreted that in our 2005 regulations and we are 
looking at it again but it is the same statutory language so it 
is not an infinite credit life under the statute, so there are 
limitations in the statute as to how long the credit can be 
used between years.
    Mr. Gonzalez. And maybe I have to even look at the 
legislation more carefully because I am really thinking in 
terms of how specific we are when it comes over to the deficits 
only, not necessarily the credit scheme. What we are doing is, 
we are extending the time to accumulate obviously deficits but 
making them up toward the tail end when we are able to when we 
have increased percentages that are allowed by States and they 
have figured out the consequences of increasing the blends 
themselves, availability and so on. But we look forward to some 
input from the Agency.
    Mr. Meyers. We are aware of certain individual situations, 
I think. With reference to California, we have talked to a 
refiner in California and we will continue to talk to 
individual refiners and others who find themselves in difficult 
situations under the statute.
    Mr. Gonzalez. I was looking at your testimony because I 
think it was interesting that you are going to be taking into 
consideration emissions, air quality, greenhouse gases, water 
quality, land use, the economy, energy security, and all of 
that, which is an ongoing process, I guess, and it is one that 
I think some members of this committee and other Members of 
Congress would agree that maybe we should have done a more 
careful analysis ourselves before we adopted the certain 
mandates. It seems to me that the President made mention of 
ethanol and the use of it in the State of the Union and somehow 
we just adopted it as gospel and we find ourselves where we are 
today without clearly looking at availability, consequences and 
such, but again, thank you for your service, and I yield back.
    Mr. Boucher. Thank you very much, Mr. Gonzalez.
    The gentleman from Illinois, Mr. Shimkus, for 5 minutes.
    Mr. Shimkus. Thank you, Mr. Chairman. I will try to be a 
little bit calmer in this round.
    Bob, welcome. I have got a couple questions, and you may 
not know this answer but it will lead to other questions. How 
many gallons of refined product do we import in this country 
each day? Do you know?
    Mr. Meyers. How many gallons? I am not sure. Those numbers 
are usually in barrels. I think about--it is over half of our 
oil is imported at this stage.
    Mr. Shimkus. Well, yes. The numbers I have is about 3 
million barrels of refined product, product that has been 
already refined overseas. Of that 3 million barrels of refined 
product at some refinery not on the continental United States, 
how much involvement does the U.S. EPA have on the air quality 
of those refineries?
    Mr. Meyers. The refineries themselves, our jurisdiction 
obviously doesn't extend to Europe and other countries from 
where the gasoline comes from but as to the product itself, it 
must meet U.S. specifications.
    Mr. Shimkus. So the refineries that are producing product 
for our market being shipped here at 3 million barrels per day, 
there is no environmental standard on how that refined product 
meets the end standard for us to receive that product?
    Mr. Meyers. We currently don't attempt to enforce 
stationary source standards against non-U.S. refineries. There 
are certain baselines applicable to foreign refineries with 
regard to their product but, again, it is a product focus.
    Mr. Shimkus. Now, right now there are 147 ethanol plants 
with a capacity of 8.5 billion gallons. Do those currently have 
to meet air quality standards?
    Mr. Meyers. Yes. If they meet our major source definitions 
under the Act, they would need to meet PSD requirements.
    Mr. Shimkus. So the ethanol refineries that we built 
because of the absence to build petroleum refineries here in 
this country are meeting a standard but the imported product in 
the refinery process is not meeting any standard, because you 
have no jurisdiction overseas, correct?
    Mr. Meyers. Well, I would say that would be correct for 
traditional criteria air pollutants. There is an open issue 
going forward in the new statute as to the greenhouse gas 
standards and how----
    Mr. Shimkus. Well, we are going to go there, so just hold 
on. There are 55 new plants under construction as well as 6 
expansions underway. These expansions are already being built. 
These new ethanol refineries had to meet air quality standards 
and permitting for construction to move forward. Is that 
correct?
    Mr. Meyers. Yes, they would need to meet applicable 
standards. Again, any particular standard or refinery may vary, 
depending on how it is constructed, what it is fired with.
    Mr. Shimkus. So hopefully between the next 9 to 12 months 
when we have 13.6 billion gallons of refined product of ethanol 
base to add to our fuel mix, they will be under refinery 
standards that we support.
    Let me move real quick. It is very curious that this debate 
is revolving around severe economic harm. You were here a 
couple weeks ago. We talked about carbon dioxide and that based 
upon the Massachusetts case, yours will be whatever the legal 
terminology is, habitat and all this other stuff, but it will 
not be involved with economic harm.
    Mr. Meyers. That is correct. I think----
    Mr. Shimkus. So we are going to debate economic harm for a 
product grown, produced, refined in this country and discourage 
the production of that but we are not going to be involved 
through your process of economic harm and carbon dioxide.
    Mr. Meyers. The endangerment language that was the subject 
of Massachusetts v. EPA talked about endangerment to public 
health or welfare.
    Mr. Shimkus. And I think that is USA Today from May 1, 
China leaves United States in dust as the number one carbon 
dioxide offender. National Journal from 3 May on India NVES 
green no. That is this whole carbon debate. You know, they are 
not going to comply. We are going to have all this pain and no 
gain. I will end up with again the debate that the chairman 
supports is the alternative fuel standard. What the President 
announced in his State of the Union was an alternative fuel 
standard, not an RFS. RFS was part of the alternative fuel 
standard. If we had moved to an alternative fuel standard with 
some air regulatory guidelines, if we had built a coal-to-
liquid refinery, would they have had to be permitted and 
blessed by you all as having met the environmental air 
standards?
    Mr. Meyers. Any new facility built in the United States is 
subject to permitting on the construction if it reaches major 
source thresholds and would need an operational Title V permit.
    Mr. Shimkus. Thank you.
    Mr. Chairman, thank you for your indulgence. I yield back.
    Mr. Boucher. Thank you very much, Mr. Shimkus.
    The gentleman from Arkansas, Mr. Ross, is recognized for 5 
minutes.
    Mr. Ross. Thank you, Mr. Chairman.
    Mr. Meyers, thank you for being here with us today. I want 
to discuss biodiesel. The biodiesel industry tells me that we 
already produce 500 million gallons of biodiesel, and that they 
know how to keep track of it under EPA's current tracking 
system. With that said, can you explain the reason why the 
diesel fuel requirement of 500 million gallons of biomass-based 
diesel cannot be required in 2009 as directed by Congress?
    Mr. Meyers. That is one of the issues we had had 
discussions with the industry on. What we are dealing with 
right now is a transition between the 2005 law and the new 2007 
requirements. For 2008, the current year, there was a provision 
that allowed us to effectively change just the applicable 
volume, raising it to 9 billion gallons but retained the 
current regulatory program. We need to make a transition to a 
new regulatory program to implement the new law. We are moving 
on that but 2009 is a year which is very tight for us to meet 
to have all the regulations in place.
    Mr. Ross. So it is not that they can't produce it, it is 
that you all can't do the paperwork by then?
    Mr. Meyers. Well, we are trying to look at ways we can 
accommodate the interests of the industry and certainly we are 
paying attention to the statute and the regulatory schedule 
that Congress laid out for us. I would just reference, after 
2005 law, we moved very aggressively. It still took us 18 
months to put together both proposed and final regulations. So 
the law was passed last December and having it all in final 
form before January 1, 2009, is an extremely short time period.
    Mr. Ross. So Congress has mandated 500 million gallons of 
biomass-based diesel fuel. The industry says they are already 
producing it and that they know how to keep track of it under 
your current EPA tracking system and yet we can pass a law and 
the folks in the industry can figure out how to make 500 
million gallons of biomass-based diesel and yet you all can't 
figure out how to track it and do the paperwork on it by the 
time prescribed by Congress?
    Mr. Meyers. Well, it is not a matter of us just deciding. 
We will need to propose that as part of our regulations, take 
public comment, and then go final. It makes most sense to do as 
much as we can as fast as we can but we have to do it in a 
manner given the enormity of the mandate and given the 
importance of the economic issues. We have to do that in a very 
thoughtful manner. So one of the directives the administrator 
tried to implement was a massive--I don't want to say massive--
a very robust outreach program. We are talking to a lot of 
stakeholders including the National Biodiesel Board and others 
to try and look at these issues and try to see if there is 
flexibility to address them. I would say we are working in 
faith and we will continue to do that but it is a very tight 
time frame to get final regulations.
    Mr. Ross. Well, I would hope that the EPA would respect the 
wishes and the legislation passed by Congress and be able to 
figure out how to do the paperwork and the rules and regs, 
given the fact that the industry has certainly adhered to the 
legislation and they have got the ability to meet the new 
requirements. I would hate to see us see even higher diesel 
prices and see us continue to increase our dependence on 
foreign oil simply because a Federal agency couldn't put in 
place a tracking system, the rules and regs, in the timeframe 
that was prescribed by Congress, and I just want to bring that 
to your attention and urge that you work with us so that we 
can--we have a lot of challenges with ethanol right now and 
there has been a lot said about that, but with biomass-based 
diesel we don't have nearly the controversy we have over 
ethanol. It can reduce our dependence on foreign oil. It can 
reduce the price that my truckers and farmers pay at the pump, 
and I think it is very critical that the EPA be able to figure 
out how to do their part of this equation just as the folks in 
the biodiesel industry have figured out how to do theirs, and I 
appreciate your time.
    Mr. Meyers. Thank you.
    Mr. Boucher. Thank you, Mr. Ross.
    The gentleman from Oklahoma, Mr. Sullivan, is recognized 
for 5 minutes.
    Mr. Sullivan. Thank you, Mr. Chairman, Mr. Meyers.
    The Energy Independence and Security Act allows the EPA to 
make assessments on cellulosic production and adjust the 
mandate's volumes downward if it makes a determination there 
won't be enough production to meet the requirements of the 
bill. However, EPA has until 30 days before the year a required 
volume of cellulosic is supposed to start before making this 
determination. This doesn't give refiners much lead time. Is 
the EPA considering making this production determination sooner 
to help ease the potential supply problems?
    Mr. Meyers. We are willing to look at any permissible 
constructions. One thing that the statute provides, however, is 
that we rely on the estimates of EIA, the Energy Information 
Administration, in looking at the projections. They are 
required under law to make those projections at a certain time 
period so--and we need to look at those under the statute. So 
it is the timing that was contemplated by the statute, would be 
my response, but we will be happy to look at any flexibilities 
there might be.
    Mr. Sullivan. So you would be willing to look at 
flexibilities?
    Mr. Meyers. I would be happy to look at the matter. Again, 
we are required on an annual basis to look at EIA's 
projections. The EIA's projections are essentially done in the 
fall for the next coming year so that is where the time frame 
came from.
    Mr. Sullivan. And also following up on Congressman Barton's 
question, could biofuels increase greenhouse gas emissions on a 
life cycle basis including indirect factors and land-use 
change?
    Mr. Meyers. Could any particular biofuels?
    Mr. Sullivan. Yes.
    Mr. Meyers. I think it is theoretically possible.
    Mr. Sullivan. Thank you.
    Mr. Boucher. Thank you very much, Mr. Sullivan.
    We have two members on the Democratic side who are members 
of the full committee, not members of the subcommittee, who 
have joined us here and we will welcome questions from them. We 
also have a recorded vote pending on the Floor, and our goal 
will be to try to fit in both sets of questions prior to 
recessing for that vote.
    First I will recognize the gentleman from Texas, Mr. Green, 
for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman, and thank you for 
allowing me to waive on the subcommittee for this hearing 
because renewable fuels is important to where I come from in 
Houston, Texas, and fuel itself.
    Section 1505 of the Energy Policy Act of 2005 directed the 
EPA to perform a study and provide Congress with a report on 
public health, air quality and water resource impacts of fuel 
additive substitutes for MTBE, which today is almost 
exclusively made by ethanol, and has this report been 
completed?
    Mr. Meyers. The 1505 report has not presently been 
completed. I think we are scheduled to do that fairly soon and 
have that report available.
    Mr. Green. Do you have any kind of idea when we might be 
able to see that? I think that would help us in making some of 
the decisions?
    Mr. Meyers. I will be happy to follow up. I was under the 
impression we may have that as early as next month.
    Mr. Green. Do you think it is wise for Congress and the 
Administration to support a vast increase in renewable fuel 
standard before the basic public health, air quality, and water 
quality impact studies of ethanol are completed?
    Mr. Meyers. If the question was whether it was wise for 
Congress to----
    Mr. Green. To do something before we see the results of 
your report.
    Mr. Meyers. Congressman, I worked here for 23 years so I 
respectfully would respect the judgment of Congress.
    Mr. Green. OK. Well, we appreciate that. At least as one 
Member, I would like to see what the report says before we 
increase the standards. Do you have any idea what the report 
might conclude?
    Mr. Meyers. No, I do not. I would be happy to follow up for 
the record and verify our timing, but we certainly are mindful 
of the studies that were passed in 2005, as well as the new 
requirements in the 2007 law.
    Mr. Green. The RFS includes requirements of studies of 
various aspects of biofuels. These studies included assessing 
the RFS impacts on feed grains, livestock food, forest products 
and the energy industry and its environmental and resource 
conservation impacts. If the results of these studies were 
found negative and harmful impacts on the industries or to the 
environment, does the bill require the EPA administrator to 
adjust the mandate to prevent these unintended consequences?
    Mr. Meyers. I do not believe the bill would require the 
administrator. The administrator on his own motion is able 
under the 2007 statute to initiate a waiver process.
    Mr. Green. OK. Do you believe it would be beneficial for 
the EPA to have the authority to alter the mandated RFS levels 
in order to prevent any unintended consequences if the results 
of these or other studies are found negative impacts on our 
public health, environment or the economy?
    Mr. Meyers. I would demur on any legislative changes to the 
current statute since the Administration has not taken a 
position on any bill yet.
    Mr. Green. Mr. Chairman, thank you again for your time and 
for allowing me to waive on, and appreciate the courtesy.
    Mr. Boucher. Thank you very much, Mr. Green.
    The gentleman from Michigan, Mr. Stupak, is recognized for 
5 minutes.
    Mr. Stupak. Thank you, Mr. Chairman, and thanks for holding 
this hearing. I have been pestering you to have this hearing 
because I am really concerned about the renewable biomass 
definition as the trees and residues from tree plantations on 
non-Federal lands cleared prior to enactment, so I have a 
number of questions along those lines, if I may.
    Regarding the renewable biomass definition in the bill, 
what are the roadblocks you see in enforcement? How are you 
going to enforce this to make sure that it does not come from 
Federal lands?
    Mr. Meyers. That is something that we are currently 
examining and we are aware of situations where the mill or 
facility might not know exactly where one tree came from and 
another tree came from. But in situations where the statute 
would pose difficulties, we would have to exercise some 
judgment and rule of reason and interpret the statute in a way 
that we thought could be workable.
    Mr. Stupak. But as on the 2005 energy conference report 
having timber and trees be part of our ethanol solution here, 
we never dreamed we would be sitting here saying, did this log 
come from a State forest or Federal land or private land? That 
is insane. How about, have you had any discussions how this 
would be enforced? Would the requirement of enforcement be on 
the production facilities, cellulosic production facility, or 
on the logger? The only one who is going to know where the wood 
came from is the logger, and when they are going down the road, 
we don't know if they are State, Federal, where they are coming 
from.
    Mr. Meyers. We have not reached a determination on those 
issues. Since we are at the proposal stage that will afford us 
the opportunity to take comment with regard to various 
compliance options. But we need to deal with the statute we 
have and interpret it the best we can.
    Mr. Stupak. Well, I have a couple of entrepreneurs looking 
at my district right now to make significant improvements in 
developing ethanol from cellulosic from timber. Can you give us 
any time frame in which you might clarify this so we know how 
it is going to be enforced, or what is the enforcement 
mechanism, so I want to make sure they can move ahead with 
their investment, private investment that they are trying to 
make and in areas such as mine.
    Mr. Meyers. We are moving ahead. Again, we have been 
talking to a lot of stakeholders and doing the type of analysis 
we need to do, and our intent is to have the proposed rule out 
and available obviously in the Federal Register this fall, 
early this fall is our projection right now.
    Mr. Stupak. Well, let me ask you this. You mentioned in 
your testimony there will be important work with the U.S. Trade 
Representative so that you are meeting your international 
obligations. Explain that in more detail, could you? What are 
the international concerns here?
    Mr. Meyers. Well, in application of the language of the 
statute, we are dealing with both domestically produced and 
imported product so the standards are applicable to the product 
and its life cycle direct, indirect inputs. So we would need to 
look and consult with the USTR and others as to any regulations 
to implement that to make sure they were consistent with U.S. 
treaty requirements.
    Mr. Stupak. OK. Well, in my district, we border Canada, and 
we move timber all the time back and forth for production of 
paper and other things. How would you enforce this provision 
here on trees or residues from tree plantations on non-Federal 
lands if the wood came from Canada?
    Mr. Meyers. I have not thought of that question, sir, and I 
would be happy to provide it for the record.
    Mr. Stupak. All right. I have no further questions, Mr. 
Chairman. I hope we can pass the Herseth bill and get this 
thing resolved. You can see all the nightmares this provision 
would provide, especially for those of us who have timber-based 
economy, and as we try to move cellulosic properties of timber 
to make it into ethanol, it is impossible to enforce the 
provisions set forth.
    So with that, I would yield back the balance of my time. I 
thank the gentleman for his time and for his forthright 
answers.
    Mr. Boucher. I thank the gentleman from Michigan, and Mr. 
Meyers, you are excused with the committee's thanks. We 
appreciate your testimony today.
    We are going to recess pending the votes that are now on 
the Floor, probably for 45 minutes to 1 hour, and so those who 
would like to obtain lunch can do so, and we will reconvene as 
soon as the last vote is concluded. It is going to be at least 
45 minutes before that happens. So we will welcome our third 
panel at that time and until then, the committee is in recess.
    [Recess.]
    Mr. Boucher. The subcommittee will come to order.
    We welcome now our third panel of witnesses. Mr. Nathanael 
Greene, the senior policy analyst for the National Resources 
Defense Council; Mr. Bob Dinneen, president of the Renewable 
Fuels Association; Mr. Charles Drevna, president of the 
National Petrochemical and Refiners Association; Mr. Randy 
Kramer, president of KL Process Design Group in South Dakota, 
which has developed a wood waste ethanol demonstration plant; 
Mr. Scott Faber, vice president of Federal affairs for the 
Grocery Manufacturers Association; Mr. Rick Tolman, chief 
executive officer of the National Corn Growers Association; Dr. 
Mark Stowers, vice president of research and development of 
POET; and Mr. Gawain Kripke, director of policy and research 
for Oxfam America. We welcome each of our witnesses.
    Without objection, your prepared written statements will be 
made a part of the record. We will welcome your oral 
presentations and ask that each witness please limit the 
presentation to approximately 5 minutes.
    Mr. Greene, we will be happy to begin with you.

 STATEMENT OF NATHANAEL GREENE, SENIOR POLICY ANALYST, NATURAL 
                   RESOURCES DEFENSE COUNCIL

    Mr. Greene. Thank you very much, Mr. Chairman, Ranking 
Member, members of the committee. Thank you for this chance to 
share my views on the opportunities and challenges of 
implementing the renewable fuels standard. My name is Nathanael 
Greene. I am a senior policy analyst with the Natural Resources 
Defense Council and one of our main experts on renewable energy 
technologies.
    At NRDC, we believe that biofuels from biomass produced 
following environmental safeguards processed efficiently and 
used in efficient vehicles can reduce our dependence on oil, 
reduce emissions of global warming pollution, contribute 
significantly to a vibrant farm economy, and avoid impacting 
food prices. However, pursued without adequate safeguards and 
standards, large-scale biofuel production carries grave risks 
to our lands, forests, water, wildlife, public health, and 
climate.
    The new renewable fuels standard was a major step forward 
for our biofuels policy, a step away from the ``more is 
better'' approach that has dominated our policies toward a 
``better is better'' approach. The latest research confirms 
Congress's foresight in crafting the renewable fuel standard to 
do the following four things: Firstly, to set minimum life 
cycle greenhouse gas emissions standards for all biofuels from 
new facilities; secondly and importantly, to define the life 
cycle greenhouse gas emissions to include all of the emissions 
from the full life cycle; from cultivation, production through 
to combustion and specifically to include both the direct and 
indirect emissions from land-use change. Accounting for 
emissions from land-use change is the most important step to 
producing low-carbon biofuels and taking biofuels out of the 
food price equation. It is through increasing the competition 
for arable land that biofuels face the greatest risk of 
increasing global warming pollution and driving up food prices.
    The third important part in the renewable fuel standard is 
encouraging the production of plentiful biofuel feedstocks, 
including woody biomass while ensuring that the renewable fuel 
standard mandate does not drive up the destruction of old-
growth forests, native grasslands or imperiled ecosystems or 
the degradation of our Federal forests. These lands and 
wildlife safeguards are critical to getting biofuels right. 
Proposals like H.R. 5236 to remove the protections not just 
from our Federal lands but from all of our lands would turn 
biofuels done right into biofuels done wrong.
    The fourth and most important part of the renewable fuel 
standard is that it requires the vast majority of new biofuels 
required under the law to be advanced biofuels derived from 
renewable cellulosic biomass, providing a life cycle greenhouse 
gas emissions reduction of at least 60 percent compared to the 
fossil fuels they replace.
    The efficacy of the renewable fuel standard depends 
entirely on EPA's implementation of these critical provisions. 
EPA has good momentum from the work they have been doing 
implementing the President's Twenty in Ten Executive Order but 
aggressive and effective implementation will require resources 
and monitoring. Congress should make sure that EPA is fully 
funded to do this implementation and monitor EPA's progress to 
ensure that science rather than politics drives the resulting 
regulations.
    New crops and conversion technologies are developing 
rapidly and would make it easier to produce lots of biofuels 
with a smaller environmental footprint and without impacting 
food prices, but technologies are not guarantees of good 
environmental performance. Just because we can do it right 
doesn't mean that we will. We need to maintain the 
environmental safeguards and performance standards in the 
renewable fuel standard and build on them, guiding the market 
so that innovation and competition will drive biofuels to 
provide the greatest benefits.
    Looking beyond the renewable fuel standard, Congress should 
adopt a low-carbon-fuel standard, as California and 
Massachusetts are planning to do. I believe this builds on a 
lot of ideas that were mentioned in the opening statements 
about really letting the market and innovation thrive. Congress 
should also pass comprehensive climate legislation built around 
a mandatory economy-wide carbon cap-and-credit trading system, 
and finally, Congress should reform the various existing 
biofuels tax credits and import tariffs to be a single 
technology-neutral performance-based credit to encourage water 
efficiency, reduced water pollution, better soil management and 
enhanced wildlife management.
    Thank you very much for your time.
    [The prepared statement of Mr. Greene follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
    Mr. Boucher. Thank you very much, Mr. Greene.
    Mr. Dinneen.

     STATEMENT OF BOB DINNEEN, PRESIDENT, RENEWABLE FUELS 
                          ASSOCIATION

    Mr. Dinneen. Thank you, Mr. Chairman, Ranking Member Upton, 
members of the committee. I really appreciate the fact that you 
are holding this hearing today, Mr. Chairman. It gives us an 
opportunity to address some of the overblown hyperbole about 
this issue.
    Mr. Chairman, the RFS made sense when you passed it in 
December and gasoline prices were $90 a barrel. It makes more 
sense today with gasoline prices or crude oil prices at $120 a 
barrel. When I said $120, I am sorry. Just while this hearing 
has been going on, the market has increased. We are now looking 
at $122-a-barrel oil. Ethanol is the only tool that we have 
today that can address the Nation's most serious economic 
issue: our dependence on imported oil and the rising price of 
gasoline and crude oil. A Merrill Lynch analyst recently had 
concluded that ethanol today reduced gasoline prices 15 
percent. They would be 15 percent higher were it not for 
ethanol. An Iowa State University study said that consumers 
were saving between 29 and 40 cents a gallon, depending on 
where you were in the country, as a result of the use of 
ethanol.
    Ethanol reduces gasoline costs for two reasons. One, it is 
cheaper than gasoline today. Today gasoline is trading at about 
$3.07. Ethanol is trading for about $2.50. It is also adding 
supply to a tight market. Ethanol today represents 7 percent of 
the U.S. motor fuel market. Ethanol is also the only tool that 
we have today to begin to address global warming. An analysis 
using the GREET model that DOE has developed demonstrated that 
the ethanol produced last year, some 6 billion gallons of high-
quality motor fuel, reduced greenhouse gas emissions by 
somewhat 14 million tons. That is the equivalent of taking 2.5 
million vehicles completely off the road.
    Ethanol today is also the best tool that we have to create 
economic opportunities across rural America. Indeed, ethanol is 
revitalizing small towns across this country. There are 147 
ethanol plants in operation today that are producing some 8.5 
billion gallons of ethanol and 14 million metric tons of 
distillers feed. Ethanol has become a critical component of 
both the fuel and the feed markets. That is something that some 
critics of the ethanol industry don't recognize today, that we 
are just utilizing the starch, and what is left behind in 
ethanol product is a very high-value, high-protein feed product 
that is sold to dairy and cattle and poultry markets. We 
produce feed and fuel.
    The causes of food price inflation today, as has been 
discussed, are complicated. They include rising demand, 
changing dietary habits, weather, droughts in Australia, in 
Europe, and floods in Indonesia that have devastated the rice 
crops, speculation in the market that is driving all 
commodities, and most certainly, the cost of oil. You can't 
produce $2.50 corn with $4.50 diesel fuel. Energy prices are 
driving agriculture commodity markets today. They are driving 
food markets today.
    Take this in perspective. People want to say that this is 
about corn-derived ethanol, and indeed, ethanol has been 
growing. Corn farmers took the market signal a year ago. They 
planted more acres than they ever have, 93 million acres. They 
produced more corn than ever, 2.7 billion bushels more than the 
previous year. The increased demand for ethanol for that corn 
was just 600 million bushels. That means that there was 2.1 
billion bushels grown last year over and above the increased 
demand for corn-derived ethanol. The increased ethanol demand 
or corn used for ethanol production last year was just 2 
percent of the world corn supply. We are not driving that 
market. USDA suggests that their analysis concludes 3 percent 
of the total world food inflation is caused by ethanol, maybe. 
I think it might be overstated but I will accept that, but that 
means 97 percent is caused by other things.
    Now, Scott Faber is going to tell you that well, that is 
true, there are these other things, but the only thing that we 
can do anything about is ethanol. Wrong. The single most 
important factor driving food price inflation today is oil and 
you are doing something about that. The RFS is doing something 
about that. We are reducing crude oil costs. We are reducing 
gasoline costs. Governor Perry from Texas, as has been 
discussed, has submitted a waiver request from this program. 
Our analysis suggests that if he is successful and he waives 
half of the renewable fuels standard so that 4.5 billion 
gallons of ethanol has to come out of the marketplace, gasoline 
prices will increase $1.14 from $3.68 to $4.79. That is severe 
economic harm.
    You will not have food security in this country unless and 
until you have energy security in this country. Ethanol is not 
the only answer. It is not the silver bullet but it is an 
extraordinarily important first step. The first-generation 
ethanol plants that are in production today are setting the 
foundation for the second generation of ethanol production. You 
need to make sure that we continue the investment that we have 
made toward domestic renewable fuels. We cannot allow the 
manufacturer hysteria about corn biofuels to derail the 
important progress that we are making toward a more energy-
secure nation.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Dinneen follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
    Mr. Boucher. Thank you, Mr. Dinneen.
    Mr. Drevna, we will be happy to hear from you.

      STATEMENT OF CHARLES T. DREVNA, PRESIDENT, NATIONAL 
             PETROCHEMICAL AND REFINERS ASSOCIATION

    Mr. Drevna. Thank you, Chairman Boucher, Ranking Member 
Upton and members of the subcommittee.
    Twenty years ago this week, NPRA testified at a hearing of 
three House subcommittees and the hearings were entitled ``The 
Role of Ethanol in the 1990s.'' In that testimony, NPRA 
cautioned, and I quote, ``Broad national mandates of ethanol 
use represent poor public policy. Such mandates will impose 
significant costs on consumers and on the Nation.'' NPRA's 
statement 20 years ago went on to warn of the potential of 
increased costs of both food and fuel under a national ethanol 
mandate. The testimony also raised concerns regarding 
distribution, pointing out that our Nation lacked the 
transportation infrastructure to move large volumes of ethanol. 
And finally, the statement referenced consumers' concerns about 
the possible harmful effects of ethanol-blended fuels on their 
motor vehicles.
    Twenty years later, the concerns about ethanol mandates 
remain. Today we are faced with a massive biofuel mandate that 
in our opinion is unsustainable, untenable and unworkable for 
all the reasons pointed out 20 years ago and then some.
    Mr. Dinneen just mentioned that corn took the market 
signal. There was no market signal. It was a direct signal from 
Congress mandating how much ethanol was to be used. A free 
market would have done otherwise. Mr. Dinneen also mentioned 
the fact that ethanol is cheaper than gasoline. Well, it may be 
cheaper at the pump to put it in but the American taxpayer pays 
for it again every April 15. That has to be taken into 
consideration too.
    These issues and concerns are described in detail in our 
written testimony so I won't address all of them here, but the 
topic we are hearing most about today is the impact of biofuels 
on food prices. Not even 5 months after the enactment of the 
new biofuels mandate, the chickens are coming home to roost and 
we literally can't afford to feed them. The price of corn, the 
source of 97 percent of ethanol in the United States, and also 
the main ingredient in chicken feed, has tripled over the past 
2 years. The other primary ingredient in chicken feed, 
soybeans, has nearly doubled in cost just the past year. So in 
fact, we can't afford eggs either. According to the U.S. Bureau 
of Labor Statistics, the price of eggs has gone up 35 percent 
since March 2007.
    Now, again, I will agree with Mr. Dinneen that all this 
cannot be attributed to biofuels but a Purdue University study 
released in September of 2007 found that of the estimated $22 
billion in additional food costs in the United States in 2007, 
about two-thirds of the increase, or about $15 billion, is 
directly related to biofuels. Yet as a May 1st article in the 
Washington Post points out, the pain that American consumers 
are feeling due to high grocery prices ``pales when compared 
with the challenges faced by those in the developing world.'' 
Studies by the Organization of Economic and Cooperation 
Development found out that ``the rush to energy crops threatens 
to cause food shortages and damage to the biodiversity.'' World 
Bank President Robert Zoellick stated recently that biofuels is 
a significant contributor to rising fuel costs. The list goes 
on.
    Mr. Chairman, these are just a few of the things that have 
been said recently regarding biofuels and food prices, and 
while the relationship between the two is significant and not 
receiving the necessary scrutiny, we should also consider the 
negative effects on both water quality and quantity as well as 
the land-use issue including greenhouse gas emissions that 
scientists, including a Nobel laureate, have expressed concerns 
with.
    Now here in the United States, more and more members of 
this body from both sides of the aisle across the Nation are 
beginning to speak out against new biofuels mandates. The 
governors of the State of Texas, and also, not mentioned yet 
today, the State of Connecticut, have already requested waivers 
from the RFS, so this is not a southwestern oil-producing kind 
of concern. There are no refineries in Connecticut.
    Last December, despite warnings from scientists, 
economists, environmentalists, food producers, and others, 
Congress passed a new renewable fuels standard. We along with 
many others from a broad range of interests hope that Congress 
is now willing to heed those warnings and repeal a well-
intentioned but clearly misguided policy.
    I want to take my remaining 15 seconds again to say, as the 
refining industry, we support the use of ethanol, we support 
the use of advanced biofuels, but what we have done since 
December with the mandate is so frontload, these requirements, 
and we are basing a lot on the advent of technology for 
cellulosic, which is fine, but there is a gap. There is a huge 
gap between what we can and what can't be done in producing 
ethanol from any source, let alone cellulosic or advanced 
fuels. Now, at a hearing that Mr. Dinneen and I were at on the 
Senate side on February 7, he continually mentioned ``we look 
forward to'', ``we hope to'', ``we have faith that we will get 
cellulosic.'' Well, I guess this is some new faith-based 
initiative. Unfortunately, we in the refining industry have to 
comply with this or we face $32,000-a-day penalties.
    So we ask that Congress take a long, hard look at this and 
I appreciate it, and I am sorry for running over time, Mr. 
Chairman, but again, thanks for letting me state what we think 
the current situation is.
    [The prepared statement of Mr. Drevna follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
    Mr. Boucher. Thank you very much, Mr. Drevna.
    Mr. Kramer.

STATEMENT OF RANDY KRAMER, PRESIDENT, KL PROCESS DESIGN GROUP, 
                              LLC

    Mr. Kramer. Mr. Chairman, ranking members, members of the 
committee, thank you for the opportunity to provide testimony 
on the implementation of the 2007 renewable fuels standard. I 
am Randy Kramer, president and cofounder of KL Process Design 
Group, a biofuels engineering and project development firm 
located in Rapid City, South Dakota. Our cofounder, Dave 
Litzen, is also here with me today.
    Since 2001, KL has collaborated with researchers at the 
South Dakota School of Mines and Technology to privately fund 
and develop a thermal-mechanical process to make ethanol from 
ponderosa pine, which is found in abundance in the Black Hills. 
The research resulted in what we believe to be the first wood 
waste ethanol demonstration plant capable of commercial 
operations. With the Black Hills National Forest supervisor, 
our research is dedicated to forest stewardship that includes 
finding better uses for gathered forest and mill waste that 
otherwise provides added fuel to forest fires.
    KL is uniquely qualified to discuss the implications and 
effects of cellulosic ethanol provisions legislated in the 2007 
energy bill. Beyond our experience in corn- and cellulose-based 
ethanol plant designs, our engineers are veterans of oil 
exploration and refining and our project managers are veterans 
of combat operations in oil-rich areas of the world. 
Conversely, here in the United States, KL's technology has 
resulted in the construction of ethanol plants where farmers 
are paid market prices for their corn, which offset or 
eliminate farm subsidies. Our cellulosic technology also helps 
reduce particulate emissions resulting from controlled and 
uncontrolled fires in our national forest, costing the Federal 
government millions of dollars to manage.
    Corn-based ethanol is the only large-volume biofuels bridge 
to the 2022 cellulosic ethanol goal. We must protect this 
bridge as a strategic component to allow companies like ours to 
improve cellulose technology and we take exception to the 
misrepresentations being touted by the media, special interest 
groups and United Nations, who cling to the baseless notion 
that ethanol is somehow displacing agricultural resources and 
linking the displacement of corn from food to fuel.
    According to USDA statistics, in 2007 field corn used to 
produce ethanol increased by about 1 billion bushels but corn 
production also increased by 3 billion bushels. Specifically, 
between March 2007 and March 2008, there was a 13 percent 
increase in stored, uncommitted surplus corn, both on and off 
the farm. Today in South Dakota, there is still corn on the 
ground not being used for ethanol or export. We need corn-based 
ethanol as a bridging strategy, it is not the primary cause for 
rising food prices or shortages, and will always be an integral 
part of our energy policy, even as cellulose and other 
technologies advance. Incentives for both corn- and cellulose-
based ethanol should be maintained just as incentives for oil 
discovery were put in place and maintained since 1925.
    Last week President Bush stated that the United States has 
not built a refinery since 1976. KL takes a different approach. 
In the biofuels vernacular, there were in fact 84 new 
biorefineries built over the last 10 years that have 
effectively replaced the need for approximately eight new 
average-sized oil refineries.
    To meet the requirements of the RFS, we know there will be 
a need to continue improving efficiencies in grain and 
cellulose-based designs to move us quickly to what we believe 
we call the glucose economy where starch or cellulose provide 
the sugars used to produce chemicals in biofuels. To sustain 
the momentum of building additional biorefineries that meet the 
intent and aggressive mandates of the RFS, administrative rules 
must allow for all forms of biomass without regard to its 
source.
    As we plan to co-locate our second plant with a sawmill in 
the Black Hills, one specific clause of the 2007 energy bill 
inserted by special interests must be corrected. Specifically, 
credits intended for cellulosic ethanol produced from biomass 
harvested from our national forests through federal programs 
already in existence must be restored. The intent of this last-
minute provision was to discourage the harvesting of material 
from the national forests for biofuels production. However, the 
drafters failed to understand that existing timber harvest and 
thinning programs already allow for the removal of material 
from the national forests. In the case of thinnings, any 
reasonable person would understand that processing this waste 
into a clean-burning fuel is less destructive to the 
environment than burning it in place. In the case of commercial 
timber harvested through this Federal programs, mill waste from 
these operations fit perfectly with our business model but the 
burden of segregating non-credit-qualifying bits of national 
forest mill waste from private or State timberland mill waste 
that do qualify is as impractical as it sounds. Our desire is 
not to clear-cut the forest to produce biofuels, but given 
existing harvest programs, credits from these operations are 
critical to the near-term success of cellulosic ethanol and the 
process improvements we make during this development period 
enable us to keep pace with the 2022 goals.
    This concludes my testimony. Thank you for the opportunity.
    [The prepared statement of Mr. Kramer follows:]

                       Statement of Randy Kramer

    Testimony Outline:
    Background: KL's Cellulose-Based Ethanol Technology and 
Operating Plant
    Importance of All Forms of Bio-fuels Technology
    Redefining United States Motor Fuels Refining Capacity
    Defining the new ``Glucose Economy''
    Correcting RFS Cellulosic Credit Language Regarding our 
National Forests
    Addressing other Bill Provisions: Mandated Studies on E85 
Efficiency Improvements and Ethanol Pipeline Transport
    Mr. Chairman, Ranking Members, Members of the Committee, 
thank you for the opportunity to provide testimony on the 
implementation of the 2007 Renewable Fuel Standard. I am Randy 
Kramer, President and co-founder of KL Process Design Group 
(KL), a biofuels engineering and project development firm 
located in Rapid City, South Dakota. Our co-founder, Dave 
Litzen is also here with me today. Since 2001, KL has 
collaborated with researchers at the South Dakota School of 
Mines and Technology to develop a thermal-mechanical process to 
make ethanol from ponderosa pine, which is found in abundance 
in the Black Hills. The research resulted in what we believe to 
be the first wood waste ethanol demonstration plant capable of 
commercial operations. With the Black Hills National Forest 
Supervisor our research is dedicated to forest stewardship that 
includes finding better uses for gathered forest and mill waste 
that otherwise provides added fuel to forest fires.
    KL is uniquely qualified to discuss the implications and 
effects of cellulosic ethanol provisions legislated in the 2007 
Energy Bill. Beyond our experience in corn and cellulose-based 
ethanol plant designs, our engineers are veterans of oil 
exploration and refining and our project managers are veterans 
of combat operations in oil-rich areas of the world. 
Conversely, here in the United States, KL's technology has 
resulted in the construction of ethanol plants where farmers 
are paid market prices for their corn which offset or eliminate 
farm subsidies. Our cellulosic technology also helps reduce 
particulate emissions resulting from controlled and 
uncontrolled fires in our national forests, costing the Federal 
Government millions of dollars to manage.
    Corn-based ethanol is the only large volume, biofuels 
bridge to the 2012 cellulose ethanol goal. We must protect this 
bridge as a strategic component to allow companies like ours to 
improve cellulose technology; and we take exception to the 
misrepresentations being touted by the media, special interest 
groups and the United Nations who cling to the baseless notion 
that ethanol is somehow displacing agricultural resources and 
linking the displacement of corn from food to fuel. According 
to USDA statistics, in 2007 field corn used to produce ethanol 
increased by about 1 billion bushels but corn production also 
increased by 3 billion bushels. Specifically, between March 
2007 and March 2008 there was a 13% increase in stored, 
uncommitted surplus corn-both on and off the farm. Today, in 
South Dakota, there is still corn on the ground not being used 
for ethanol or export. We need corn-based ethanol as a bridging 
strategy, it is not the primary cause for rising food prices or 
shortages, and it will always be an integral part of our energy 
policy even as cellulose and other technologies advance. 
Incentives for both corn and cellulose based ethanol should be 
maintained just as incentives for oil discovery were put in 
place and maintained since 1925. Last week, President Bush 
stated that the United States has not built a refinery since 
1976. KL takes a different approach. In the biofuels vernacular 
there were, in fact, 84 new bio-refineries built over the last 
10 years that have effectively replaced the need for 
approximately eight new averaged-size oil refineries. This 
assumes 115,000 barrels per day of crude feed with 50% of the 
crude converted to gasoline. The difference is crude oil will 
only be extracted once where bio-refining feedstocks replenish 
every year. This new RFS is the only responsible energy plan 
that requires even more bio-refineries by 2012. As cellulose-
based ethanol technology improves, our business model departs 
from the current paradigm of large grain-based ethanol plants 
in the Midwest. While grain-based plants are an important part 
of the future bio-refining strategy, cellulosic ethanol plants 
will be smaller and decentralized throughout the US; co-
locating with or close to biomass sources that are immune to 
the geo-agricultural constraints needed for grain based ethanol 
production, thereby eliminating or reducing the cost of 
transporting biomass material and in close proximity to 
populated biofuels demand. This design disarms critics who 
believe ethanol is too far from the end user and makes use of 
biomass that is either burned or land-filled.
    To meet the requirements of the RFS, we know there will be 
a need to continue improving efficiencies in grain and 
cellulose based designs to move us quickly to what we call the 
``glucose economy'' where starch or cellulose provide the 
sugars used to produce chemicals and bio-fuels. The United 
States possesses the biomass to meet the needs of a glucose 
economy and is well-documented in the Department of Energy's 
own ``Billion Ton Study'' conducted at the Oak Ridge Laboratory 
in April 2005. As noted in the study, much of this biomass is 
located on federal lands to include our national forests. To 
sustain the momentum of building additional bio-refineries that 
meets the intent and aggressive mandates of the RFS, 
administrative rules must allow for all forms of biomass 
without regard to its source. As we plan to co-locate our 
second plant with a sawmill in the Black Hills, one specific 
clause in the 2007 Energy Bill, inserted by special interests 
after lawmakers reviewed what they thought to be the final 
language, must be corrected. Specifically, credits intended for 
cellulosic ethanol produced from biomass harvested from our 
national forests through federal programs already in existence, 
must be restored. The intent of this last minute provision was 
to discourage the harvesting of material from the national 
forests for bio-fuels production. However, the drafters failed 
to understand that existing timber harvest and thinning 
programs already allow for the removal of material from the 
national forests. In the case of thinnings, any reasonable 
person would understand that processing this waste into a clean 
burning fuel is less destructive to the environment than 
burning it in place. In the case of commercial timber harvested 
through these federal programs, mill waste from these 
operations fit perfectly with our business model but the burden 
of segregating non-credit qualifying bits of national forest 
mill waste from private or state timberland mill waste that do 
qualify is as impractical as it sounds. Imagine the complexity 
of separating mill waste for the sake of recovering valuable 
cellulosic ethanol credits. The cost would likely outweigh the 
credit. We live near a national forest and consider ourselves 
active stewards of the environment. Our desire is not to clear-
cut the forest to produce biofuels but given existing harvest 
programs, credits from these operations are critical to the 
near term success of cellulosic ethanol; and the process 
improvements we make during this development period enable us 
to keep pace with the 2012 goals.
    Whether ethanol comes from corn or cellulose, it is the 
near-term answer as it can fuel most combustion engines today. 
While 10 and 85 percent blends are standard, we have experience 
with a variety of blends and it is our conclusion that a blend 
between 20 and 30 percent would be the near-term answer for all 
gasoline-fueled vehicles. My point is simple. We do not expect 
ethanol to replace all fossil fuels in America, but complement 
them. Like Brazil, most all of our automobiles can operate with 
at least a 30% blend without modification. The EPA could allow 
these blends with the stroke of a pen. Related to this 
discussion, the 2007 Energy Bill calls for a study to improve 
the efficiency of flex fuel vehicles. As a start point, I would 
like to offer a recommendation. We know that ethanol burns 
cleaner and cooler than gasoline. What isn't well known is that 
ethanol has the potential to burn more efficiently than 
gasoline because of its high octane rating. Our experience 
through test trials with the American Lemans Racing Series and 
Harley-Davidson motorcycles shows E85 not only burns cooler and 
cleaner but also provides more horsepower and increased mileage 
over regular gasoline when burned in high compression, fuel-
injected engines. There is no need to commit further federal 
dollars to a study that would likely result in directing the 
automobile industry to revive its design of high-compression 
engines that fell victim when leaded gasoline was banned. 
Simply put, ethanol is the modern day octane booster but 
burning ethanol in modern day low-compression engines results 
in lower gas mileage because the high octane is not used to its 
advantage and potential. Reverting to this simple engine design 
change will likely help the automobile industry meet CAFE 
standards without sacrificing performance. Finally, I also note 
that the 2007 Energy Bill calls for a study on pipeline 
transportation of ethanol. In the interest of saving costs and 
time, we have the results of a successful 1981 study conducted 
by Williams Pipeline Company and can provide that study to this 
Committee. This concludes my testimony. Thank you for this 
opportunity.
                              ----------                              

    Mr. Boucher. Thank you very much, Mr. Kramer.
    Mr. Faber.

  STATEMENT OF SCOTT FABER, VICE PRESIDENT, FEDERAL AFFAIRS, 
               GROCERY MANUFACTURERS ASSOCIATION

    Mr. Faber. Thank you, Mr. Chairman. Let me just start by 
saying that I agree that there are many factors that are 
contributing to record food inflation that we are all seeing in 
the grocery aisles right now, including global demand, export 
restrictions, poor weather, the value of the dollar, but there 
is only one significant new factor that Congress can change and 
that is our decision last year to divert this year 25 percent 
of our corn into our fuel supplies, and in the coming years, 40 
percent of our corn and about 30 percent of our vegetable oils 
to our fuel supplies, and in general, we think Congress should 
revisit these mandates and begin to reduce our reliance on food 
as an energy feedstock and instead accelerate the development 
of fuels that do not pit our energy needs against the needs of 
the hungry or the needs of the environment.
    Let me just lay some of the groundwork. I am sure you have 
seen this in the grocery store. Food prices are now rising 
about twice as fast as the rate of inflation. They increased 
almost 5 percent in 2007, the largest increase that we have 
seen in 17 years, and more importantly, the price of basic 
staples--milk, meat, and eggs--has grown much more 
dramatically. In the case of eggs, for example, it has 
increased about 70 percent just in the last 3 years. This 
obviously poses a problem for all consumers but it really poses 
a particular challenge to the lowest 20 percent of Americans, 
who spend about a third of their after-tax income on food. 
Sudden increases in the price of basic staples are much harder 
for poor Americans to struggle through and certainly even more 
significant for people in the developing world, where they 
spend up to 70 percent of their income on food.
    It is also important to note that for every farmer who is 
doing better as a result of these high commodity prices, and no 
one can blame farmers for trying to benefit from these high 
commodity prices, there are many more farmers who are losing 
money: our livestock producers. Many of these livestock 
producers are facing unprecedented losses and it is important 
to be fair. Many more jobs are being lost in rural communities 
because of the high price of feed than are being created as a 
result of these mandates. That is why we are hopeful that the 
Administration will act quickly to reduce the impact of these 
food-to-fuel mandates on our food prices, but this isn't merely 
a question of what we can do today to address the problems 
consumers are seeing in the grocery store. It is also a 
question of what we can do today to address the risk of even 
higher food prices in the next few years as again 40 percent of 
our corn and 30 percent of our vegetable oils are diverted to 
our food supplies. Let me just draw your attention to three 
charts.
    [Chart shown.]
    The first chart shows how much of our corn and how much of 
our soy oils will be diverted from our food supplies to our 
fuel supplies. This is a fairly simple calculation to do based 
on projected yields and projected acres. This is something even 
I could do on the back of an envelope.
    [Chart shown.]
    And then you can also see something that doesn't get nearly 
as much attention is the amount of our vegetable oils, which 
are also used throughout our food production systems, how much 
of our vegetable oils will be diverted in the next few years. 
These increases in the amount of food that is being diverted to 
our fuel supplies are certainly going to make today's prices 
look good by comparison.
    [Chart shown.]
    And then the last chart I just want to draw your attention 
to is what we are forecasting food price inflation will be in 
the next few years. We are forecasting--as you can see, it was 
4.9 percent last year. We are forecasting it will be 7.5 to 8 
percent in the next few years, and those are conservative 
numbers. Because of the delayed plantings that we have seen in 
the Midwest and the risk of drought, these numbers could 
actually look quite good by comparison.
    Let me just close by saying I am the first to say that 
these mandates that are driving higher food prices might make 
sense if they were serving other goals, but the simple fact of 
the matter is that these mandates have very little impact on 
energy imports or prices. For example, diverting 25 percent of 
our corn crop this year has displaced about 7 billion of the 
Nation's 140-billion-gallon gasoline supply. What is more, we 
have heard food-to-fuel mandates are also increasing greenhouse 
gas emissions and pose other environmental challenges, 
including poor air and water quality and water shortages in 
parts of the country where drought is a significant problem.
    Let me just close by saying that at a time when thousands 
of Americans are losing their jobs or losing their homes, we 
don't think it makes much sense for Congress to artificially 
increase the price of food, and while certainly many Americans 
are worried about filling their gas tanks, many more are 
worried about filling their stomachs and so we urge the 
Committee to revisit these mandates and revisit the use of food 
as a feedstock and to accelerate the development of fuels that 
do not pit our energy needs against the needs of the hungry and 
the environment. Thank you.
    [The prepared statement of Mr. Faber follows:]

                        Statement of Scott Faber

    My name is Scott Faber and I am Vice President for Federal 
Affairs for the Grocery Manufacturers Association.
    In light of dramatic increases in food prices and new 
questions about the environmental costs of fuels derived from 
food crops, we urge the Committee to revisit the food-to-fuel 
mandates included in the Energy Independence and Security Act 
of 2007. \1\ Although there are many factors contributing to 
the sharp increase in US and global food prices--including 
increasing global food demand, export and other restrictions, 
adverse weather in some countries, commodity speculation, and 
higher energy prices--a significant new factor and the only 
factor affecting food and feed prices that is under the control 
of Congress is the food-to-fuel mandates and subsidies 
diverting food into fuel production.
---------------------------------------------------------------------------
    \1\ The Energy Independence and Security Act of 2007 increased the 
federal corn ethanol mandate from 5.4 billion gallons in 2008 to 9 
billion gallons in 2008, 10.5 billion gallons in 2009, 12 billion 
gallons in 2010. In subsequent years, the mandate annually increases by 
600 million gallons to 15 billion gallons in 2015. The Act also creates 
a 1 billion gallon bio-diesel mandate by 2012.
---------------------------------------------------------------------------
    Food prices are now rising at twice the overall rate of 
inflation. According to the Bureau of Labor Statistics, 
domestic food prices rose by 4.9 percent during 2007--the 
largest increase in 17 years. But the domestic price of basic 
staples such as eggs, milk, and meat have increased even more 
dramatically in the last 3 years. Egg prices have increased 69 
percent, milk prices have increased 22 percent, and chicken 
prices have increased 12 percent. \2\ The cost of feed grains 
and oilseed crops used to produce these animal products has 
increased at an alarming rate. Since the 2005 and 2006 crop 
years, farm-level corn prices have increased more than 150 
percent, and farm-level soybean prices have increased more than 
100 percent. Although other factors are affecting domestic food 
prices, growing demand for corn and soybeans has also 
contributed to tightening supplies of other major commodities, 
creating a ripple effect that has driven up the costs of food 
production.
---------------------------------------------------------------------------
    \2\ Consumer Price Index data, Bureau of Labor Statistics
---------------------------------------------------------------------------
    Soaring food prices pose significant challenges for the 
poorest 20 percent of Americans, who spend roughly one-third of 
their after-tax income on food. Soaring food prices have 
contributed to a rising demand at food banks and a record 
number of Americans seeking food stamps. At a time when 
thousands of Americans are losing their homes and jobs, it 
makes no sense to artificially increase the price of food with 
policies that will divert food into our fuel supplies.
    Rising food prices also pose significant challenges to the 
hungry in developing countries, where roughly 800 million \3\ 
people are hungry and consumers spend as much as 70 percent of 
their income on food. Rising commodity prices have pushed 
global food prices up 83 percent over the last 3 years \4\--and 
by 57 percent in the last year alone--pushing millions of 
people into poverty. UN Secretary General Ban Ki-moon and World 
Bank President Robert Zoellick have both characterized rising 
food prices as ``seven lost years in the fight against global 
poverty.'' In combination, rising prices and declining 
commodity stocks have forced global food aid programs to ration 
food and have contributed to food riots and protests in more 
than 30 countries. Rising food inflation in the developing 
world is not merely a food security issue but is a national 
security issue. The World Bank warns that 33 nations are at 
risk of social unrest because of the rising price of food and 
energy. \5\
---------------------------------------------------------------------------
    \3\ C. Forde Runge and Benjamin Senauer. How Biofuels Could Starve 
the Poor. Foreign Affairs, May/June 2007.
    \4\ Bob Davis and Douglas Belkin, Food Inflation, Riots Spark 
Worries for World Leaders,'' Wall Street Journal, April 14, 2008. A1.
    \5\ ``The World Food Crisis,'' New York Times, Editorial, April 10, 
2008.
---------------------------------------------------------------------------
    Rising feed prices pose significant challenges for 
livestock producers, which have contributed to the rising price 
of milk, meat and eggs. Although many crop farmers have 
benefited from high corn and soybean prices, many more 
livestock producers are facing unprecedented losses. Food-to-
fuel mandates will increase the cost of livestock production by 
$17.7 billion in 2008-2009 \6\, and have already contributed to 
the loss of hundreds of jobs.
---------------------------------------------------------------------------
    \6\ Elam, Thomas, ``Biofuels Support Policy Costs to the U.S. 
Economy,'' FarmEcon LLC, March 24, 2008.
---------------------------------------------------------------------------
    Food prices will continue to rise as more and more corn and 
soy oils are diverted to our fuel supplies. In particular, we 
estimate that food inflation will rise by 7 to 8 percent \7\ 
over the next few years, as up to 40 percent of our corn and 30 
percent of our vegetable oils are diverted from our food 
supplies to our fuel supplies. \8\ The Producer Price Index for 
food has risen at an annualized rate of 10 percent over the 
past three months. Rising demand for basic commodities is also 
reducing fruit and vegetable production. Because stocks of 
basic commodities have fallen to low levels, a poor corn or 
soybean harvest in 2008 could result in even more dramatic 
increases in food prices. We are particularly concerned by 
reports that poor weather has delayed corn plantings in the 
Midwest.
---------------------------------------------------------------------------
    \7\ Lapp, Bill, ``Back To The '70s? How Higher Commodity Prices Are 
Leading to the Return of Food Price Inflation,'' Advanced Economic 
Solutions, December 2007.
    \8\ Derived from USDA and EIA data
---------------------------------------------------------------------------
    Unfortunately, food-to-fuel mandates have little impact on 
energy import or prices. Diverting 25 percent of the US corn 
crop has displaced roughly 7 billion gallons of the Nation's 
140 billion gallon gasoline supply--or less than 4 percent of 
our gasoline supplies, when relative energy values are 
considered. \9\ Diverting 40 percent of our corn crop to 
produce 15 billion gallons of corn ethanol would replace less 
than 7 percent of our gasoline supplies, when relative energy 
values are considered. \9\ When the global petroleum market is 
considered, ethanol consumption in 2007 represented only 1 
percent of global oil consumption. In the United States, the 
Energy Information Administration reports that ethanol 
consumption accounted for only 2 percent of total US petroleum 
consumption. Ethanol's small share of petroleum markets, its 
significant transportation, blending, and storage costs, and 
its reduced energy content compared with gasoline reduce the 
likelihood that food-to-fuel mandates will affect gasoline 
prices and may even result in higher gasoline prices in some 
regions.
---------------------------------------------------------------------------
    \9\ derived from Energy Information Administration projections
---------------------------------------------------------------------------
    What's more, food-to-fuel mandates increase greenhouse gas 
emissions and pose other environmental challenges. Diverting 
food crops to our fuel supplies has artificially increased the 
price of commodities, accelerating the conversion of pasture 
and forest lands to crop production at home and around the 
globe. Current and expected conversion of pasture and forest 
lands will release carbon into the atmosphere and reduce the 
availability of carbon ``sinks'' that help sequester carbon. In 
addition, food-to-fuel mandates increase water and air 
pollution, compound water shortages, and contribute to the loss 
of habitat for wildlife. Increases in fertilizer use associated 
with expanded corn and soybean production will increase the 
amount of nitrogen and phosphorous being washed into rivers and 
bays, including the Chesapeake Bay, and will increase ground-
level ozone at a time when more than 300 counties are 
struggling to meet Clean Air Act limits. Increasing the use of 
distillers grain--a byproduct of ethanol production that is fed 
to animals but has less nutritional value--increases the amount 
of phosphorous reaching our waterways like the Chesapeake.
    Congress should revisit food-to-fuel mandate schedules and 
subsidies and accelerate the development of other bio-fuels. 
High crude oil prices are providing sufficient market 
incentives to produce corn ethanol, making government 
intervention unwarranted. We believe Congress should revisit 
and reform food-to-fuel mandate schedules and subsidies to 
gradually reduce our reliance on food as an energy feedstock 
and to accelerate the development of bio-fuels that do not pit 
our energy needs against the needs of the hungry or the 
environment. In particular, we believe that Congress should 
accelerate the development of cellulosic ethanol derived from 
crop wastes, grasses and other materials that do not increase 
food prices, hold significantly greater promise to displace 
traditional sources of gasoline, and could have less impact on 
the environment.
    Congress should also take steps to address the needs of the 
hungry and to accelerate global agricultural development. At 
the same time that the number of hungry across the globe is 
increasing, donations to the world's hungry have fallen to the 
lowest level in 35 years. \10\ Congress should take steps to 
expand domestic and international hunger assistance programs to 
help address the impacts of food inflation at home and abroad, 
including emergency assistance that can be immediately used to 
make regional purchases of commodities. And, Congress should 
also provide new funds to increase the productivity and 
sustainability of agricultural lands in the developing world. 
Between 2003 and 2007, global usage of coarse grains like corn 
grew by 3.4 percent, compared with a long-run rise in yields of 
just 1.5 percent, according to USDA.
---------------------------------------------------------------------------
    \10\ Ryan, Missy, ``Commodity Boom Eats into Aid for World's 
Hungry,'' Reuters, September 5, 2007.
---------------------------------------------------------------------------
    In conclusion, we urge the Committee to revisit the food-
to-fuel mandates in light of dramatic increases in food prices 
and new questions about the environmental costs of fuels 
derived from food crops. Although there are many factors 
contributing to record food inflation--including increasing 
global demand, export restrictions, changing weather patterns, 
commodity speculation, and higher energy prices--a significant 
new factor and the only factor affecting food and feed prices 
that is under the control of Congress is food-to-fuel mandates 
and subsidies diverting food into our fuel supplies. 

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Boucher. Thank you very much, Mr. Faber.
    Mr. Tolman.

     STATEMENT OF RICK TOLMAN, CEO, NATIONAL CORN GROWERS 
                          ASSOCIATION

    Mr. Tolman. Thank you, Mr. Chairman, Ranking Member Upton 
and members of the Committee. I appreciate the opportunity to 
discuss the implementation of the newly enacted renewable fuels 
standard and the opportunities it has brought to rural 
economies and farmers across the Nation and to dispel some of 
the false assumptions about the role of corn in biofuels 
production.
    My name is Rick Tolman. I am the CEO of the National Corn 
Growers Association, NCGA. We represent more than 32,000 dues-
paying farmers from across 48 States as well as 300,000 farmers 
who contribute to corn check-off programs through our 
affiliated State organizations.
    NCGA thanks Congress for their support and inclusion of the 
renewable fuels standard in the Energy Independence and 
Security Act of 2007, or EISA. This policy has been critical to 
the growth and economic development of rural America and has 
added value to our product, which for so long has been priced 
below the cost of production. EISA is sound energy policy that 
will encourage a diversification of our renewable resources and 
further reduce our dependence on foreign oil.
    Biofuels have created investment and spurred economic 
development in many small towns that have suffered from 
depressed grain prices and flat demand. According to a recent 
study by a consulting firm, small and rural communities with 
ethanol facilities nearby see a dramatic economic boost. In 
2007, an average 100-million-gallon-per-year ethanol 
biorefinery added $367 million to the local GDP and created 
more than 2,400 new jobs across various sectors of the economy 
in that community.
    Recently many critics have questioned the value and 
consequences of the renewable fuels standard. They are quick to 
point to biofuels as the primary reason for global food price 
increases. A look at the facts surrounding food prices simply 
doesn't support that logic. The effects of $120-a-barrel oil 
have far more reaching effects on consumer prices for food. 
Petroleum is used in virtually every step of the food supply 
chain that begins with the farmer and ends at the consumer's 
table. In fact, just 19 cents of every consumer dollar can be 
attributed to the actual cost of farm products. Even when corn 
is priced at $5 a bushel, a box of Corn Flakes contains less 
than 8 cents worth of corn. According to USDA, a 50 percent 
increase in the price of corn translates to an overall increase 
of retail food prices of less than 1 percent. In addition, a 
recent study by Texas A&M University stated, ``Relaxing the 
renewable fuels standard does not result in significantly lower 
corn prices.'' The study went further to say, ``The underlying 
force driving changes in the agricultural industry, along with 
the economy as a whole, is higher energy costs evidenced by 
$100-a-barrel oil.'' Ethanol is not the primary factor in food 
price increases. It saves consumers at the pump, reduces 
greenhouse gas emissions and is being produced more 
efficiently, more economically and more sustainably every day.
    In terms of global supply, contrary to the media, it is not 
a choice of food or fuel. USDA is projecting the corn industry 
to have a record export number this year for 2008 to satisfy 
growing demand for corn around the world, a record amount. We 
are exporting more this year than we have ever exported before 
so it is not a choice. It is disingenuous to say that ethanol 
is not a factor in heightened corn demand but how much of a 
factor is it? If we look purely at supply and demand numbers, 
we see that the corn supply has grown large enough to 
accommodate both food and feed and ethanol demand, and Bob and 
others have gone through those numbers with you.
    I will set Mr. Faber's mind at ease. We in our analysis do 
not ever see the ethanol taking more than 27 percent of our 
corn supply, even out to 2015 when the corn portion hits its 
peak. That is because farmers are very productive. Meeting the 
needs of growing world population requires cutting-edge 
technology innovation. Last year farmers produced an average of 
151 bushels of corn to the acre. Our corn yields have doubled 
in less than the last 40 years and they are projected to double 
again in the next 25 years. We are on the cusp of a very 
significant increase in technology and productivity. That means 
we don't have to significantly increase acres and we don't have 
to choose between food and fuel. We can do both in a reasonable 
and rational way.
    Additionally, there is much misinformation being circulated 
today on agricultural land use and crop allocation. We hear 
misleading statements in the press that corn displaces wheat 
and soybeans and other acres. In fact, corn acres will be down 
in 2008, wheat and soybean acres will be up, and wheat acres 
have increased each of the last 3 years.
    Congress directed EPA to examine the role of direct and 
indirect land-use changes in connection with the legislation. 
In that consideration, the impacts and interplays of numerous 
global, economic, social, political factors on land also need 
to be considered. In particular, it is imperative that the 
impact of global energy markets on agriculture, specifically 
land use, be understood and modeled. Further, the effects of 
population growth. According to USDA, the conversion of 
farmland in the United States to urban use is on the rise. Over 
the last 10 years we have lost an average of 2.2 million acres 
of farmland going to urban use.
    In conclusion, NCGA sees the renewable fuels standard as a 
critical part of domestic energy security. Its inclusion has 
strengthened our energy policy and further diversified our 
Nation's fuel supply in a time of global volatility and 
increasing demand for energy. Corn growers will continue to 
meet the growing demands of food, feed, and fuel in an 
economic, rational, and environmentally responsible manner.
    Thank you.
    [The prepared statement of Mr. Tolman follows:]

                        Statement of Rick Tolman

    Mr. Chairman, Ranking Member Upton and Members of the 
Committee, on behalf of the National Corn Growers Association 
(NCGA), I appreciate this opportunity to discuss the 
implementation of the newly enacted Renewable Fuels Standard 
and the opportunities it has brought to rural economies and 
farmers across the Nation and to dispel certain assumptions 
about the role of corn in biofuel production.
    My name is Rick Tolman; I am the CEO of the National Corn 
Growers Association. The National Corn Growers Association 
represents more than 32,000 corn farmers from 48 states as well 
as more than 300,000 farmers who contribute to corn check-off 
programs and 26 affiliated state corn organizations across the 
country. NCGA continues to be committed to creating new 
opportunities and markets for corn in the US and around the 
globe.
    The National Corn Growers Association thanks the Committee 
for their support and inclusion of the Renewable Fuels Standard 
in the Energy Independence and Security Act of 2007 (EISA). 
This policy has been critical to the growth and economic 
development of rural America and has added value to our 
product, which for so long has been priced below the cost of 
production. EISA was sound energy policy that encouraged a 
diversification of renewable resources and further reduced our 
reliance on foreign oil.
    Recently, many critics have been quick to point to biofuels 
as the primary reason for global food price increases as well 
as questioning biofuels ability to reduce greenhouse gas 
emissions and be produced in a sustainable manner on a world 
stage. Evidence strongly shows that ethanol is not the primary 
factor in modest food price increases, saves the American 
consumer at the pump, reduces greenhouse gas emissions and is 
being produced more efficiently, more economically and more 
sustainably everyday.
    Agriculture has been the backbone of the American economy 
since the birth of the nation. US producers have consistently 
answered the call to provide feed, food and now fuel to the 
global marketplace. We have seen dramatic increases in corn 
yields on existing farmland due to advances in technologies, 
more environmentally efficient practices being utilized by 
farmers, and increases in demand across the globe continue to 
be met.

                           RURAL DEVELOPMENT

    Renewable fuels policy has been instrumental in the 
rejuvenation of rural economies throughout the world. Biofuels 
has created investment and spurred economic development in many 
small towns that have suffered from depressed grain prices and 
flat demand. According to a study by consulting firm LECG, LLC, 
small and rural communities with ethanol facilities nearby see 
a much more dramatic economic boost. In 2007, an average 100 
million gallon per year ethanol biorefinery added $367 million 
to the local GDP, created more than 2,400 new jobs across all 
sectors of the economy including 50 at the biorefinery itself 
and more than 1,300 in the agricultural sector, and has boosted 
local household incomes by more than $100 million.
    Additionally, higher global grain prices and development of 
world biofuels trade are allowing small farmers in many parts 
of the world to earn a profit on their crops for the first time 
in years. For example, a $115 million ethanol project in 
Nigeria is expected to empower 5,000 local peasant farmers, 
bring new investment and jobs to the area, and stimulate 
agricultural production. The project's coordinator, Mr. Tunji 
Awoniyi, says ethanol and crop production is ``a huge weapon to 
fight deprivation, either financially or otherwise'' in 
Nigeria, which currently imports ethanol from Brazil to satisfy 
its biofuels requirements .
    The strong renewable fuels policies in the United States 
have not only created local, rural economic growth, but have 
increasingly promoted development and prosperity among third 
world farmers. The Renewable Fuels Standard and other biofuel 
programs have created opportunities for rural communities and 
subsistence farmers across the globe.

                              FOOD PRICES

    Recently, the media and ethanol critics have demonized corn 
ethanol and attempted to solely blame higher commodity costs 
and government policies promoting renewable fuel on rising food 
costs.
    In attempting to justify their opposition to the RFS and 
ethanol expansion, opponents continue to make the claim that 
higher corn prices are causing higher retail food prices. A 
look at the facts surrounding food prices simply doesn't 
support that logic. More so, the effects of $120 barrel oil 
have far reaching effects on the consumer price for food. A 
recent study by the Oregon Department of Agriculture details 
the factors affecting food price: a growing middle class in 
Latin America and Asia, drought in Australia, low worldwide 
wheat stocks, increases in labor costs, a declining U.S. 
dollar, regional pests, diseases, droughts and frosts, and 
marginal impacts from ethanol demand for corn and sugarcane.
    Again, numerous cost factors contribute to retail food 
prices. According to USDA, labor costs account for 38 cents of 
every dollar a consumer spends on food. Packaging, 
transportation, energy, advertising, profits and other costs 
account for 43 cents of the consumer food dollar. Petroleum is 
used in virtually every step of the food supply chain that 
begins at the farm and ends at the consumer's table. One recent 
study found that a $1-per-gallon increase in the price of gas 
has three times the impact on food prices as does a $1-per-
bushel increase in the price of corn. Certainly the recent 
increase in diesel prices may have a more pronounced effect.
    In fact, just 19 cents of every consumer dollar can be 
attributed to the actual cost of farm products like grains, 
oilseeds and meat. Retail food products such as cereals, snack 
foods, and beverages sweetened with corn sweeteners contain 
very little corn. Consider that even when corn is priced at $5 
per bushel, a standard box of corn flakes contains less than 8 
cents worth of corn.
    Corn is a more significant ingredient for meat, dairy, and 
egg production. Still, corn represents a relatively small share 
of these products from a retail price perspective. As an 
example, according to the National Cattlemen's Beef 
Association, it takes about 3 pounds of corn to produce one 
pound of beef . This equates to 27 cents worth of corn in a 
pound of beef when corn is $5 per bushel. Similarly, there's 
about 16 cents worth of corn in a gallon of milk when corn is 
$5 per bushel.
    Because corn and other grains constitute such a small 
portion of retail food products, higher grains prices are 
unlikely to have any significant impact on overall food 
inflation, according to a number of experts. According to USDA 
economist Ephraim Liebtag, a 50% increase in corn prices 
translates to an overall increase of retail food prices of less 
than 1 percent. Similarly, a recent analysis by Informa 
Economics found that higher corn prices ``explain'' only 4 
percent of the increase in retail food prices. This is 
corroborated by a fact sheet released by the White House last 
week that says, ``Increased production of corn-based biofuels 
is estimated to account for only three percent of the 43 
percent increase in global food prices.''
    And though we're hearing lots of news about ``skyrocketing 
higher food prices,'' very few reporters have taken the time to 
see just how much higher food prices really are. According to 
the Bureau of Labor Statistics, the 25-year average annual 
inflation rate for food is 2.9%. That means $100 worth of 
groceries in 2006 should have cost $102.90 in 2007 under normal 
food inflation circumstances. But, as the news has widely 
reported, food inflation was above the 25-year average in 
2007--but how high above normal? USDA estimates food inflation 
averaged 4% in 2007. So that means in 2007 the consumer spent 
$104 on groceries that would have cost $100 in 2006 instead of 
the $102.90 that would have occurred under normal 
circumstances. So the net increase was really about $1.10 for 
every $100 worth of groceries, or 1 penny per dollar spent. 
According to USDA, projected food inflation for 2008 is likely 
to register between 4 and 5%.
    Let's compare that to gasoline. In May 2006, $100 would 
have bought you 37 gallons of regular unleaded gasoline. You 
would have had to spend $116 to buy the same 37 gallons in May 
2007; and this week, 37 gallons will cost you $133.20. That's a 
33% increase since 2006. And gasoline prices would be even 
higher without ethanol. A working paper released last week by 
Iowa State University says ethanol ``has caused retail gasoline 
prices to be $0.29 to $0.40 per gallon lower than would 
otherwise have been the case. `` This conclusion is consistent 
with the findings of a recent Merrill Lynch analysis that 
determined gas prices would be 15 percent higher without 
ethanol.
    A recent study by the Agricultural Food and Policy Center 
at Texas A&M University stated, ``Relaxing the RFS does not 
result in significantly lower corn prices.'' The study went 
further to say, ``the underlying force driving changes in the 
agriculture industry, along with the economy as a whole, is 
overall higher energy costs, evidenced by $100 barrel oil.''
    More so, if policymakers are truly interested in 
determining the cause of higher corn prices, our suggestion 
would be that they start not with the ethanol industry, but 
with speculative investors in the commodity markets. As the 
stock market and other traditional investments began to 
stagnate in mid- to late-2007 and the credit crunch hit 
financial markets, index funds and ``commodity pools'' began to 
pour unprecedented amounts of capital into commodities. 
According to the March 31 edition of the financial publication 
Barron's, ``The speculators' bullishness may be way overdone, 
in the process lifting prices far above fair value.'' According 
to Bloomberg, ``commodity-index funds control a record 4.51 
billion bushels of corn, wheat and soybeans through Chicago 
Board of Trade futures, equal to half the amount held in U.S. 
silos on March 1. The holdings jumped 29 percent in the past 
year as investors bought grain contracts seeking better returns 
than stocks or bonds. The buying sent crop prices and 
volatility to records and boosted the cost for growers and 
processors to manage risk.''
    Anecdotal reports from commodity analysts suggest that as 
much as one-quarter of the current price of nearby corn futures 
is due to speculative investment-primarily large index funds 
and commodity pools. This means if you take the speculators out 
of the market, corn futures would likely be in the $4 to $4.50 
per bushel range.
    Again, we know there are several other factors driving corn 
demand and price that are frequently overlooked. Consumers in 
nations like China and India are demanding more protein and 
more calories. Just as China and India are driving global 
energy markets, they are also a major demand driver in 
agricultural markets. Increased meat consumption is most 
significant in China where it has tripled in the last two 
decades and continues to grow at 4% to 5% per year. Globally, 
per capita meat consumption has grown from 30 kilograms in 1980 
to an estimated 43 kilograms today.
    In addition to increased meat exports to China, India and 
elsewhere, USDA is projecting the corn industry will export 
more corn than ever before in 2008 to satisfy increased feed 
demand in Central America, Asia and other regions.
    Certainly, currency valuations play a role in surging 
exports. The relative weakness of the dollar is encouraging 
stronger exports and is making U.S. ag products a good buy on 
the world market. In 2007, the dollar weakened against the 
currencies of our largest trade competitors. The biggest 
reduction was versus Brazil, at over 17 percent, but the dollar 
also declined versus the euro (10 percent) and the Chinese yuan 
(5 percent).
    And despite higher feed costs and tighter margins, the 
amount of corn demanded by the U.S. livestock and poultry 
sector will be 10 percent higher this year than last. This 
proves the livestock industry has not yet contracted and that 
meat demand is strong.
    It would be disingenuous to say that ethanol is not a 
factor in heightened corn demand. But how much of a factor is 
it? If we look purely at supply and demand numbers, we see that 
the corn supply has grown large enough to accommodate increases 
in ethanol demand.
    For example, in 2006, corn growers produced 10.5 billion 
bushels and used 2.2 billion bushels for ethanol, meaning 8.3 
billion bushels were available for other uses. Additionally, 
the equivalent of 600 million bushels of corn was returned to 
the feed supply in the form of distillers grains. In 2007, corn 
farmers grew a record crop of 13.1 billion bushels and are 
expected to use 3.1 billion bushels for ethanol, meaning 10 
billion bushels are available for other uses. Nearly 900 
million bushels of corn equivalent feed will be returned to the 
feed market in the form of distillers grains this year. So, 
yes, the amount of corn used for ethanol is growing, but so is 
the amount of corn available for other markets and so is the 
amount of distillers grains-one of the major benefits of using 
corn as a feedstock in ethanol production.

                          TECHNOLOGY ADVANCES

    Furthermore, meeting the food and energy needs of a growing 
world population requires cutting-edge technology and 
innovation. New technologies are allowing U.S. corn farmers to 
produce substantially more corn per acre of land in a 
sustainable way, and with more countries adopting 
biotechnology, yields globally will be substantially higher, 
further helping to meet growing demand for food and fuel.
    Today's corn seeds are produced using the latest advances 
in plant biotechnology and plant breeding. The best traits from 
one corn variety are combined with complementary traits from 
other varieties to produce more productive and stronger corn 
plants. Last year, corn farmers produced an average of 151.1 
bushels of corn per acre. Consider that 10 years ago in 1998, 
the average production pr acre was 134.4, and 20 years ago in 
1988, the average was 84.6 bu./acre.
    Corn productivity per acre is increasing at an accelerated 
rate because of new advances in marker-assisted breeding, 
biotechnology and improved farming practices. Increased yield 
per acre allow growers to harvest considerably more corn 
without significantly increasing acreage. Based on past 
performance, average production per acre is projected to hit 
175 bu./acre by 2015. However, if productivity gains continue 
to increase at the rate of recent years, average yield per acre 
could easily reach 180 bu./acre by 2015. Seed technology 
providers have stated corn production could reach 250 to 300 
bushels per acre by 2030. Improved management practices also 
play an important role in increased productivity, and the 
increased adoption of tools like GPS yield mapping and 
precision nutrient application are helping farmers grow more 
corn per acre while conserving inputs.

                              INPUT COSTS

    Another factor that is often overlooked in this debate is 
the soaring price of energy on farmers. Due to surging energy 
prices, the cost of producing corn has increased tremendously 
in recent years. Though our energy efficiency is constantly 
improving, a considerable amount of fossil fuel energy is 
required to produce our bountiful grain harvests.
    According to the Energy Information Administration, the 
cost of diesel fuel averaged $4.18 last week, an increase of 
48.6% over the same time last year and more than double the 
price from April 2004.
    Undoubtedly, the main factor driving production costs to 
unprecedented levels is skyrocketing fertilizer costs. The farm 
price for nitrogen fertilizers--most of which are derived from 
natural gas--has increased more than 60 percent just since 
2006. Additionally, between January 2007 and February of this 
year, the price of two other important fertilizers--potash and 
diammonium phosphate--increased 139 percent and 155 percent 
respectively.
    In fact, the Center for Farm Financial Management forecasts 
fertilizer costs per acre in 2008 will be double 2002 costs. 
And because fertilizer costs represent about 40 percent of a 
farmer's variable production costs, these price increases are 
having a tremendous effect on profit margins and risk.
    Higher natural gas prices also increase the farmer's cost 
of drying grain and, in some cases, irrigation. Land prices and 
cash rent prices have also increased tremendously due to the 
heightened value of agriculture products. Additionally, seed 
prices have nearly doubled in the last 4 years.
    These sharply higher input costs make growing corn in 2008 
a costly proposition. Though the farm price for corn is indeed 
higher than in the past, the farmer's profit margins are not 
all that much different than they've been historically.

                             ACREAGE TRENDS

    Additionally, there is much misinformation being circulated 
today on agricultural land use and crop allocation. We hear 
blatantly misleading statements in the press about corn acres 
displacing wheat, soybeans, and other crop acreage. We also 
hear the false rhetoric that increased demand for corn is 
leading to cultivation of grassland and other non-agricultural 
lands.
    The truth is, farmers respond to signals from the 
marketplace when they make their planting decisions--they 
always have and they always will. In 2007, the market sent a 
clear signal to farmers to plant more corn and they did. 
Farmers planted 93.6 million acres of corn--the highest level 
since 1944--and produced a record crop of 13.1 billion bushels. 
In 2008, the market is calling for more wheat and soybeans, so 
farmers are expected to plant more of those crops and less 
corn.
    It is notable that U.S. wheat acres are up for the third 
consecutive season and will be at their highest level in 10 
years. U.S. soybean acres are likely to be 18 percent higher 
than last year. USDA's projection of 74.8 million soybean acres 
in 2008 would be the third-highest level of soybean acres in 
history. Additionally, barley acres are expected to be at their 
highest level in the last 4 years.
    Corn acres will be down in 2008, but still at historically 
high levels. Given normal weather conditions during the growing 
season, it seems very likely that farmers will produce the 
second largest corn crop on record even with a reduction in 
corn acres.
    Despite strong demand for U.S. crops, the number of acres 
enrolled in the Conservation Reserve Program has not departed 
from the norm. An estimated 34.6 million acres of land is 
currently enrolled in the CRP program. That is actually above 
the 10-year average of 33.6 million acres. It does seem likely 
that some of those acres will be brought back into production 
incrementally as 10-year contracts expire, but this transition 
is not something that will happen overnight.
    The total area planted for all wheat, feed grains, 
oilseeds, and cotton is projected to be 252 million acres in 
2008, just 1 percent above 2007 levels. This disproves the 
notion that increased demand for grains and oilseeds is driving 
significant expansion of cultivated land in the United States. 
For some additional perspective, consider that the annual area 
planted to wheat, feed grains, oilseeds, and cotton in the 
early 1980s was approximately 290 million acres, 15 percent 
more land than is used today for those crops.

                            LAND USE CHANGES

    Looking specifically at land use changes in relation to the 
increased RFS, Congress directed EPA to examine the role of 
direct and indirect land use changes in connection with 
expanded biofuels production. NCGA believes direct land use 
change as a result of biofuel production is a legitimate 
subject for environmental analysis. In contrast, global 
indirect land use change caused by U.S. biofuel production is 
uncertain and speculative.
    Recent papers in Science by Searchinger, et al., and by 
Farigone, et al., purport to connect increased demand for corn 
for biofuel production with large, indirect land use changes to 
satisfy the demand for animal feed left unfilled because of the 
increased demand for corn. These indirect land use changes are 
in turn linked to large emissions of greenhouse gases, thereby 
incurring a ``carbon debt'' that the authors believe may take 
many years to repay. Unfortunately, there is much that is 
speculative and uncertain about these claims. The simple fact 
that U.S. corn acres will be reduced and soybean acres will be 
increased significantly in 2008 demonstrates the flawed logic 
of these papers; that is, there are significant physical 
constraints on land use and expansion of agricultural area. It 
seems much of the current thinking on land use assumes land is 
readily convertible. Also, the role of the potential to 
increase corn yields on existing farmland, while at the same 
time increasing efficiency of fertilizer and water use and 
protecting water and soil quality must also be considered.
    Land use changes cannot be looked at in the singular 
context of increased biofuel production. The impacts and 
interplay of numerous global economic, social and political 
factors on land use also need to be considered. In particular, 
it is imperative that the impact of global energy markets on 
agricultural markets (and specifically land use) are understood 
and properly modeled.
    Even if there were such data connecting increased corn 
demand for ethanol with land use changes, ethanol produced in 
the United States would be responsible, in a strict lifecycle 
analysis sense, for anything but its own environmental profile. 
``New'' corn produced in Brazil by clearing savannah to satisfy 
animal feed demand is responsible for its environmental profile 
as an animal feed, not as an ethanol feedstock.
    For example, plastic bottles are made from ethylene. 
Ethylene can also be used to make carpets. If demand for 
ethylene to make plastic bottles grows, then more ethylene will 
be needed to satisfy the unfilled demand for ethylene carpets. 
But we do not make plastic bottle producers responsible for the 
environmental profile of carpet manufacturers. Likewise, it is 
unfair and unreasonable to make corn producers who are 
producing feedstock for biofuel production responsible for the 
speculative land use decisions of individuals tens of thousands 
of miles away who are producing corn or soy for animal feed.
    More so, the debate appears to suffer from a lack of 
understanding of current tillage practices and crop yield 
growth. Further, the value, carbon intensity, and usage of 
biofuel coproducts (like distillers grains) needs more thorough 
analysis in the context of land use change. Additionally, 
continuous corn systems store more carbon than corn/soy 
rotation systems, a fact that seems to be lost on many 
academics considering these issues.
    Further, the effects of population growth on physical land 
use changes (such as increased urban and suburban development 
and the associated loss of land for other uses) need to be 
considered in any analysis. According to USDA-ERS, conversion 
of farmland to urban uses--including residential, commercial, 
and industrial development is on the rise. On average, 2.2 
million acres per year of farmland were converted to urban uses 
between 1992-2001, versus 1.1 million acres per year during 
previous decades. Developed area-which includes urban areas 
plus large lot development, development in rural areas, and 
rural roads and transportation-made up about 6 percent of US 
land in 2002. As illustrated, many factors need to be 
considered in a larger context when looking at land use changes 
dealing with biofuels and agriculture.
    In conclusion, NCGA sees the Renewable Fuels Standard as a 
critical part of domestic energy security. Its inclusion has 
strengthened our energy policy and further diversified our 
Nation's fuel supply in a time of global volatility and 
increasing demand for energy. Corn growers will continue to 
meet the growing demands of food, feed, and fuel in an 
economical and environmentally responsible manner.

                          Summary of Testimony

    The newly enacted Renewable Fuels Standard has created much 
needed economic opportunities in rural communities and to 
farmers across the Nation. Also, the National Corn Growers 
Association (NCGA) is here to dispel certain assumptions about 
the role of corn in biofuel production. Recently, many critics 
have been quick to blame biofuels for a host of supply and 
demand issues. Global food price increases coupled with the 
recent expansion of the Renewable Fuels Standard have been at 
the forefront of this biofuel debate. There are numerous 
factors that must be considered when weighing the value and 
consequences of the RFS. NCGA believes the RFS is a critical 
component of US energy policy.
    Though many opponents claim that corn-based ethanol is the 
primary cause of increased food price, the logic simply does 
not add up. In fact, just 19 cents of every consumer dollar can 
be attributed to the actual cost of farm products like grain. 
More so, relaxing the RFS will have little impact on the price 
of corn and high energy cost play a far more reaching role. In 
addition, Congress must look at dramatic increases in demand 
world wide for grain, a weak dollar, and drought in Australia.
    During this debate on the merits of biofuels, it is 
important to look at agriculture in more than a singular 
context. Looking specifically at advances in biotechnology, 
dramatic increases in input costs on farmers, acreage trends, 
and increased yields, and land use changes in relation to 
biofuels will provide a holistic view of the role corn plays in 
biofuel production.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Boucher. Thank you very much, Mr. Tolman.
    Dr. Stowers.

    STATEMENT OF MARK STOWERS, VICE PRESIDENT, RESEARCH AND 
                       DEVELOPMENT, POET

    Mr. Stowers. Mr. Chairman, Ranking Member Upton, and 
distinguished committee members, thank you for the opportunity 
to visit with you today. My name is Mark Stowers. I am vice 
president of research and development at POET. I would like to 
talk to you about our company's commitment to cellulosic 
ethanol as well as the challenges and opportunities presented 
by that endeavor.
    POET headquarters in Sioux Falls, South Dakota, is the 
largest dry mill ethanol producer in the United States. POET is 
an established leader in the biorefining industry and has built 
29 ethanol production facilities and currently manages 23 
plants in the United States, while marketing 1.3 billion 
gallons of ethanol and 3.3 million tons of distillers grain. 
POET's strategy in the cellulosic ethanol production involves 
the utilization of existing corn-to-ethanol plants. We are 
doing this in order to capitalize on the existing 
infrastructure, utilities, roads, rail lines, material 
handling, and so forth. Our focus is on corncobs as the primary 
cellulosic feedstock using corn ethanol plant's existing farmer 
and often investor network to collect cobs.
    We are also looking to eliminate the use of fossil fuels by 
processing waste streams from cellulosic ethanol process to 
energy for the entire plant, both the corn-to-ethanol and the 
cellulosic portions. This approach would allow rapid deployment 
of the cellulosic ethanol process across an expansive corn 
ethanol base through a bolt-on approach. POET is implementing 
this strategy through what is called Project LIBERTY, an 
integrated corn cellulose biorefinery. Project LIBERTY will 
transform POET Biorefining-Emmetsburg, an existing dry mill 
ethanol plant located in northwest Iowa, into an integrated 
corn-to-ethanol and cellulose-to-ethanol biorefinery. Once 
complete, this facility will produce 125 million gallons of 
ethanol, 25 of which will come from the feedstock of corn fiber 
and corncobs. The impact of Project LIBERTY in terms of ethanol 
production will be 11 percent more ethanol per bushel of corn 
and 27 percent more ethanol per acre of corn produced by using 
corncobs. Project LIBERTY will require almost no fossil fuels 
to operate. The total cost of the project will be in excess of 
$200 million and will create at least 30 new jobs at the 
facility. POET is partnered with the Department of Energy and 
Project LIBERTY whereby DOE, the Department of Energy, will 
contribute up to 40 percent, or $80 million, in project costs. 
Project LIBERTY is expected to be operational in 2011.
    There are three aspects of cellulosic ethanol production 
that are integral to Project LIBERTY: the cellulosic 
feedstocks, the process to make cellulosic ethanol, and then 
the use of alternative energy. I am not going to focus on 
alternative energy. They are in my remarks to the committee in 
written form. POET has selected corncobs as the first feedstock 
for the production of cellulosic ethanol because they offer 
significant technical, environmental, and economic advantages. 
Cobs are typically left on the field after corn harvest with 
low fertilizer value and can be removed with very little 
environmental impact. Corncobs are rich in sugars and are 
heavier than corn stalks, allowing them to be easily separated, 
and lastly, they can be collected relatively easily by the same 
farmers that provide the corn grain. Although the cob market or 
cob production is small, we have projected that over 5 billion 
gallons of cellulosic ethanol could be produced from corncobs 
in the United States.
    In 2007, POET collaborated with John Deere, Case IH, and a 
number of major farm equipment manufacturers to collect 
corncobs from 4,000 acres in southeastern South Dakota. We have 
developed our 2008 harvest plan for collecting cobs in South 
Dakota and Iowa to increase our understanding of the cob 
production process, educate growers, and continue our 
collaboration with farm machinery companies to ensure that the 
best technology is available.
    In order to develop and validate the necessary process 
technology to convert these corncobs to cellulose, we have 
restructured our research effort in cellulosic ethanol, 
expanded our collaborations across major corporations and 
universities and research institutes. Our own research and 
development activities within the company have increased in 
terms of our lab capability by six-fold, and we constructing 
our cellulose ethanol pilot plant as we speak that will be 
capable of processing corn fiber, corncob, corn stover, and 
other cellulosic feedstocks. Recent technological advances give 
us great confidence that we are able to produce cellulosic 
ethanol economically with great advances in the key 
technologies of pre-treatment, enzyme hydrolysis and 
fermentation. While these are very important breakthroughs, we 
will continue to evaluate and develop new technologies to 
further reduce the cost of cellulosic ethanol to that which is 
corn-based economics today. There are many companies that are 
also making significant investments in cellulosic ethanol.
    If the development and commercialization of cellulosic 
ethanol is to continue, there are several things that need to 
happen. One is strong corn-to-ethanol business and 
infrastructure is crucial to the development of the cellulosic 
ethanol industry. Without it, cellulosic ethanol will be 
delayed. The next piece would be the RFS continues to provide 
an important target for cellulosic ethanol. It is a real and 
attainable target. We believe we can meet the RFS standards. 
Increased usage of ethanol and greater numbers of flexible 
vehicles will be required. Recent research indicates that 
inclusion of greater concentrations of ethanol as a gasoline 
replacement beyond its rule as a historical fuel oxygenate 
represents significant opportunity. We see also continued 
government support, especially in the early stages for farmer-
level support in collecting cellulosic feedstocks, loan 
guarantees, and lastly, the importance of continued research 
and development is a critical factor.
    I would like to thank you for allowing us to speak here.
    [The prepared statement of Mr. Stowers follows:]

                       Statement of Mark Stowers

              ``POET's commitment to cellulosic ethanol''

                               Preamble:

    Mr. Chairman and distinguished committee members, thank you 
for the opportunity to visit with you today. My name is Dr. 
Mark Stowers. I am Vice President, Research and Development for 
POET. I would like to talk with you today about our company's 
commitment to cellulosic ethanol as well as the challenges and 
opportunities presented by that endeavor.

                           POET--INTRODUCTION

    POET, headquartered in Sioux Falls, South Dakota, is the 
largest dry mill ethanol producer in the United States. POET is 
an established leader in the biorefining industry through 
project development, design and construction, research and 
development, plant management, ownership, and product 
marketing. The 20-year old company has built twenty-nine (29) 
ethanol production facilities and currently manages twenty-
three (23) plants in the United States while marketing more 
than 1.3 billion gallons of ethanol and 3.5 million tons of 
distillers grains annually.
    Since 2000, POET has constructed twenty-one (21) green 
field ethanol plants in seven (7) states and completed six (6) 
major expansions of existing facilities. The value of our 
design build contracts since 2000 has exceeded $1,000,000,000. 
Additionally, three (3) green field projects of similar size 
and scope are currently under construction with several others 
in development. Each project has been successfully designed, 
built and managed by POET. These projects have resulted in the 
addition of more than one billion gallons per year (BGPY) of 
new fuel ethanol capacity.
    The POET development model is unique. It started on the 
Broin family farm in Minnesota and has been spurred by the 
investment of thousands of farmers and individual main street 
investors. POET's business model is to invest in, develop, 
design, construct, and manage ethanol production facilities. 
However, the facilities are independent limited liability 
companies (LLC) owned primarily by individuals and local 
farmers that provide the corn feedstock. POET employs the 
facility's general manager and on-site technical engineer. All 
other employees are employed by the LLC. POET also has Board of 
Director representation at each plant.
    By leveraging business size and position, POET has created 
the most successful ethanol facilities in the industry. POET 
has achieved breakthrough progress beyond ethanol processing, 
extracting extraordinary new value from each kernel of corn and 
is focused on meeting the nation's needs for domestic 
transportation fuels through cellulosic ethanol.

                    IMPORTANCE OF CELLULOSIC ETHANOL

    According to the recent U.S. Department of Commerce 
International Trade Administration Study, ``Energy in 2020: 
Assessing the Economic Effects of Commercialization of 
Cellulosic Ethanol'' there is enough cellulosic feedstock 
available in the United States to produce nearly 50 billion 
gallons of cellulosic ethanol by 2020. At this production rate 
over 1.2 million barrels per day of crude oil could be 
displaced while creating over 54,000 jobs in U.S. agriculture. 
In more practical terms at this level of ethanol production the 
U.S. could eliminate all oil purchases from OPEC and the Middle 
East--eliminating the $1.4 billion per day export of U.S. 
dollars based on $120 per barrel oil to overseas producers.
    In addition to the economic benefits, there are significant 
environmental benefits to cellulosic ethanol. Gasoline produces 
25 pounds of carbon dioxide equivalent greenhouse gas (GHG) 
emissions. By comparison cellulosic ethanol reduces GHG 
emissions by a little more than 21 pounds of carbon dioxide on 
per gallon of gasoline equivalent--an 85% reduction. In order 
to monetize that benefit we can assign a value of $20 per ton 
of carbon dioxide equivalent based on current European futures 
prices for carbon dioxide equivalents. On that basis the GHG 
emission reductions resulting from the use of cellulosic 
ethanol would be worth about $0.19 per gallon or about $2.5 
billion per year by using a little more than 20 billion gallons 
of cellulosic ethanol.
    The value of cellulosic ethanol to the U.S. economy, the 
environmental benefits and ability to mitigate national 
security risks are substantial. At POET we believe that 
cellulosic ethanol is real and achievable and something worth 
pursuing.

                    COMMITMENT TO CELLULOSIC ETHANOL

    POET's commitment to cellulosic ethanol started 8 years ago 
when our company developed proprietary fractionation and raw 
hydrolysis technologies for corn grain. These technologies 
allow POET to process corn starch more efficiently and 
economically. Corn fractionation technology or BFRACT is a POET 
proprietary process that separates the corn starch from the 
corn germ and corn fiber, the cellulosic casing that protects 
the corn kernel.
    The corn germ can be processed to produce crude or refined 
corn oil which has multiple end uses ranging from cooking to 
biodiesel. The corn fiber, due to its high sugar content can be 
processed to ethanol.
    The corn starch is processed without cooking using another 
proprietary process called BPXT, resulting in an 8-12% 
reduction in BTU consumption, greater conversion of corn starch 
to ethanol, and a high nutrient density animal feed product 
which we label Dakota Goldr. This technology is important in 
that it allows us to use less fossil fuel, get better yields of 
ethanol per acre of corn and provide an animal feed product 
that the animal agricultural sector can use to replace corn in 
livestock, dairy, swine, and poultry rations.
    As you can see, corn ethanol plants are highly efficient, 
they produce more than just ethanol, and they serve as sources 
for cellulosic feedstocks. Integrating cellulosic ethanol 
plants with corn ethanol plants has some significant 
advantages, which will be addressed later.
    The next step toward cellulosic ethanol production was to 
incorporate BFRACT and BPX into an existing biorefinery. In 
2002, POET partnered with the U.S. Department of Energy to 
construct a ``Second Generation Dry Mill Biorefinery.'' This 
effort sought to incorporate corn fractionation into a dry mill 
ethanol plant, processing the cellulosic corn fiber into 
ethanol and producing higher protein animal feed products. POET 
was able to incorporate a corn fractionation system in to a dry 
mill ethanol plant and to produce a higher protein animal feed 
product, but the ability to process corn fiber to ethanol 
proved to be more difficult due to limitations in the ability 
breakdown the corn fiber into usable sugars and for the sugars 
to be fermented to ethanol by known microorganisms.
     In 2006 a new strategy for cellulosic ethanol 
production was developed at POET involving the utilization of 
existing corn ethanol plants to:
     Capitalize on existing infrastructure (utilities, 
roads, rail lines, materials handling and so forth);
     Focus on corn cobs as the primary cellulosic 
feedstock using the corn ethanol plant's existing farmer and 
often investor network to collect cobs;
     Eliminate the use of fossil fuels by processing 
waste streams from the cellulosic ethanol process to provide 
energy for the entire plant, the corn to ethanol and cellulose 
to ethanol portions.
    This approach would enable rapid deployment of the 
cellulosic ethanol process as across an expansive corn ethanol 
base through a ``bolt-on'' approach. POET is implementing this 
strategy through what it called Project LIBERTY, an integrated 
corn cellulose biorefinery.
    Project LIBERTY will transform POET Biorefining--
Emmetsburg, an existing corn dry mill ethanol plant located in 
Northwest Iowa, into an integrated corn-to-ethanol and 
cellulose-to-ethanol biorefinery. Once complete, the facility 
will produce 125 million gallons of ethanol per year (mgpy), 25 
of which will come from a feedstock of corn fiber and corn 
cobs. Also, the facility will annually produce 80,000 tons of 
Dakota Gold Corn Germ Dehydrated and 100,000 tons of Dakota 
Gold HP animal feed. The impact of Project LIBERTY in terms of 
ethanol production will be 11% more ethanol from a bushel of 
corn through the corn fractionation process and 27% more 
ethanol from an acre of corn through the use of corn cobs. In 
addition, Project LIBERTY will require almost no energy from 
fossil fuels. The total cost of the project will be in excess 
of $200 million and create at least 30 new jobs at the 
facility.
    The primary project goal is to design, construct, and 
operate the commercial-scale, integrated cellulosic ethanol 
biorefinery. Technologies will be replicable. POET's longer-
term plans are to roll out the technologies to other existing 
dry mills or new biorefineries. POET is partnered with the 
Department of Energy in Project LIBERTY whereby DOE will 
contribute up to 40% or $80 million in project costs. Project 
LIBERTY is expected to be operational in late 2011.
    There are three aspects of cellulosic ethanol production 
that are integral to Project LIBERTY--cellulosic feedstocks, 
cellulosic ethanol process technology, and the importance of 
alternative energy generation at a cellulosic ethanol plant.
    POET has established a leadership position in the 
collection of cellulosic feedstocks. These feedstocks can be 
agricultural residues such as corn cobs, rice straw, or corn 
stover. They can also be wood fibers such as forestry wastes or 
wood wastes or energy crops such as switchgrass or Miscanthus. 
Municipal waste can also be a cellulosic feedstock.
    POET has selected corn cobs as the first feedstock for the 
production of cellulosic ethanol because they offer significant 
technical, environmental, and economic advantages. Cobs are 
typically left in the field after the corn harvest and, with 
low fertilizer value, can be removed with little environmental 
impact. Corn cobs are also rich in sugars and are heavier that 
the corn stalk, allowing them to be easily separated. And 
lastly they can be collected relatively easily by the same 
farmers that provide the ethanol plant the corn grain. Although 
the cob is small, we have projected that over 5 billion gallons 
of cellulosic ethanol could be produced from U.S. corn cobs.
    In 2007 POET collaborated with John Deere, Case IH, and a 
number of major farm equipment manufacturers to collect corn 
cobs from 4,000 acres in Southeastern South Dakota. It was a 
very exciting time. For example, one of our collaborators 
created over 6 different generations of equipment design while 
in the field--there was a great deal of excitement indeed. Corn 
farmers began to see the possibility of harvesting corn cobs 
and the potential to generate new farm income through the sale 
of corn cobs to the ethanol plant. Today, in our labs, we are 
analyzing the cobs that we collected. We are sampling the over 
60 cob piles located at the farm to determine the cob quality: 
the rate of decomposition and the performance of stored cobs in 
the production ethanol. We have developed our 2008 cob research 
plan and expect to collect cobs in South Dakota and Iowa to 
increase our understanding of the cob production process, 
educate growers, and continue our collaboration with farm 
machinery companies to ensure that the best technology is 
available.
    In order to develop and validate the necessary process 
technology for Project LIBERTY, POET restructured its research 
effort in cellulosic ethanol and expanded its collaborations 
across major corporations, universities, and research 
institutes. We expanded our internal research and development 
effort, are nearing the completion of a 6 fold increase in 
laboratory space in Sioux Falls, South Dakota, and will soon 
begin construction of a cellulosic ethanol pilot plant capable 
of processing multiple corn based cellulosic feedstocks such as 
corn fiber, corn cobs, and corn stover. So what has changed 
about the processing of cellulose to ethanol since 2002 to 
increase our confidence that cellulosic ethanol is achievable?
    Through our collaborations, especially with enzyme 
companies, we have been able to continually improve the 
process. Recently we devised a process to break down corn cobs 
into simple sugars resulting in a 60% increase in the yield of 
ethanol from cobs compared to just 3 months ago. By using 
physical and chemical treatments, we have been able to make 
corn cobs more digestible by enzymes without creating toxic by-
products. We are now able to produce significant amounts of 
sugars for fermentation to ethanol.
    We have also made significant progress in producing ethanol 
from simple sugars through better microorganisms and a better 
fermentation process. And lastly, through our own cutting-edge 
process engineering expertise we have devised a synergistic 
concept for the integration of a corn ethanol plant with one 
using only cellulosic feedstock.
    While these are very important breakthroughs we expect to 
be able to further optimize this process over the next few 
months to achieve the necessary economics to make the process 
profitable. Over time, we will continually improve the process, 
similar to what we are currently doing with the corn ethanol 
process.
    Alternative energy plays an important role in the 
cellulosic ethanol process. The low value of cellulosic ethanol 
waste streams as animal feed products makes their most 
favorable use a feedstock for solid waste fuel boilers or 
anaerobic digestion.
    POET is currently installing a solid waste fuel boiler at 
POET Biorefining--Chancellor. This boiler at our Chancellor, 
South Dakota plant will process up to 350 tons of dried wood 
chips from a waste pallet processor to produce steam for the 
plant. POET Biorefining--Chancellor has also reached agreement 
with the City of Sioux Falls to purchase landfill gas for the 
boiler. By using wood waste and landfill gas, the Chancellor 
plant can eliminate 100 percent of its need for fossil fuels.
    POET's Project LIBERTY will also incorporate a solid waste 
fuel boiler in its design. The feedstock for the LIBERTY boiler 
will be solid wastes from the cellulosic ethanol operation and 
additional corn cobs collected as part of the cellulosic 
feedstock. When coupled to an anaerobic digestion system to 
process the liquid wastes from the cellulosic process nearly 
all of the energy needs for the cellulosic- and starch-based 
operations can be met.
    There are many other companies that are also making 
significant investments in cellulosic ethanol. If the 
development and commercialization of cellulosic ethanol is to 
continue, there are several things that need to happen:
    1. A strong corn-to-ethanol business and infrastructure is 
crucial to the development of cellulosic ethanol. Without it, 
cellulosic ethanol will be delayed. The corn-to-ethanol 
industry can provide existing grower networks, production 
knowledge, product, market, and logistics knowledge to emerging 
cellulose producers and a distribution infrastructure. 
Financial lenders will support cellulosic ethanol provided 
there is a strong corn to ethanol industry.
    2. The importance of the Renewable Fuel Standard (RFS). The 
RFS provides an important target for cellulosic ethanol--a real 
and attainable target. Continued support of the RFS will be 
important in demonstrating to the ethanol, transportation fuel 
and financial industries that there will be a market for 
ethanol.
    3. Increased Usage of Ethanol and Greater Numbers of 
Flexible Fuel Vehicles. Recent research supports the inclusion 
of greater concentrations of ethanol as a gasoline 
replacement--expanding the use of ethanol beyond its historical 
role as a fuel oxygenate. So called ``Mid Level Blends'' of E20 
and E30 have shown to be equal and in some cases better in 
overall miles per gallon with little to no deleterious impact 
on vehicles that make up the current U.S. automotive fleet. The 
increased commercialization of flexible fuel vehicles could 
help drive the greater usage of these mid level blends further 
reducing our dependence on foreign oil, reducing our fuel costs 
and helping the environment.
    4. Governmental support. Governmental programs are 
necessary, especially during the early stages of the cellulosic 
ethanol industry development to enable financing at the grower/
farmer level as well as cellulosic ethanol producers in terms 
of incentives, loan guarantees and market assurances. The 
energy title of the House passed farm bill provides the support 
through loan guarantees and a pilot program for the harvesting, 
transporting, and storing of cellulosic material that will move 
cellulosic ethanol much quicker to commercialization.
    5. Continued investment in research and development. 
Significant cost reductions in the cellulosic ethanol process 
are required. The cost of enzymes still remains one of the most 
significant variable costs associated with the process. 
Microorganisms are only 20% as efficient in converting biomass 
derived simple sugars into ethanol as their counterparts that 
convert starch to ethanol.
    Thank you for the opportunity to submit recommendations. 
Poet looks forward to working in partnership with the Congress, 
DOE, and USDA to advance cellulosic ethanol to the marketplace 
in order to meet our renewable energy goals.
                              ----------                              

    Mr. Boucher. Thank you very much, Dr. Stowers.
    Mr. Kripke.

  STATEMENT OF GAWAIN KRIPKE, DIRECTOR, POLICY AND RESEARCH, 
                         OXFAM AMERICA

    Mr. Kripke. Thank you, Mr. Chairman. Thank you, 
Representative Upton and the members of the Subcommittee. 
Thanks very much for holding this hearing, which is very 
timely, and in particular for inviting Oxfam to testify and 
giving us the opportunity to bring our concerns and 
perspectives before you on this important issue.
    I am here today representing Oxfam, which is a nonprofit 
international aid and development organization. We work to 
reduce hunger and poverty in more than 120 countries around the 
globe. We don't take U.S. government funding. Our support comes 
from American citizens and philanthropies that care about 
global poverty.
    The reason we are concerned about the issues today is 
because of the rapid rise in food prices around the world. The 
international food price index has been increasing and 
accelerating in recent years. It grew by 9 percent in 2006, 
accelerated to 40 percent growth in 2007 and has been 
accelerating even faster in the first few months of this year. 
This confluence of commodity price spikes across all the major 
food commodities means that there are very few safety valves 
for consumers to switch foods. So this is creating what has 
been described as a perfect storm of stresses, and in addition, 
there is every indication that these price increases will be 
sustained over time and that we may be witnessing a structural 
change in the market.
    While this hearing is about renewable fuels, I hope you 
will give me a minute to talk about poverty and hunger because 
I think these issues are related. The majority of the world's 
poor people are food producers and so food price increases 
actually can have a beneficial effect, but all the world's poor 
people are food consumers and so higher food prices create 
stresses. On balance, the recent food price increases have been 
more negative for poverty and hunger than positive. The World 
Bank studied the issue and found that the recent food price 
hikes have probably increased global poverty by about 4.5 
percent. In global terms, that is about 100 million people 
being pushed into absolute poverty. Put another way, that is 
about 7 years of progress in reducing poverty that has been 
turned back in 1 year.
    Humanitarian agencies like Oxfam and the World Food Program 
are facing real stresses in meeting our fundamental mission. 
Those of us who distribute and use food in our programming are 
finding that our dollars go much less far than they used to and 
we are having to cut programs. Millions of people may be cut 
off of food assistance this year because of the high food 
prices, and the World Food Program and other agencies have put 
out specific appeals to deal with the high food prices.
    Now, it is important to remember what these impacts are on 
poor people. In this country, households spend about 10 percent 
of their income on food but in developing countries; poor 
people can spend between 50 and 80 percent of their income on 
food. So even modest increases in food prices can have really 
devastating impacts on households. Food prices require changes 
in behavior that include reducing food consumption, switching 
to less nutritious food, reduced consumption of other needs 
like healthcare and education, and the sale of assets like 
livestock and land or some combination of these activities.
    We believe that the diversion of corn to ethanol in this 
country is having a significant impact, not just on food prices 
on this country but globally. The scale of it is quite large. 
This year we are going to convert approximately a quarter of 
our corn harvest into biofuels. That is an increase from 20 
percent last year and 14 percent the year before. The volume is 
almost doubled in 2 years of corn diverted from food and feed 
toward energy. Now, remember that 1.2 billion people around the 
world rely on corn as their preferred staple cereal and the 
United States is a major exporter. In fact, we export more corn 
than all world's other exporters combined, so what happens in 
the U.S. markets has big impacts on corn prices and other 
commodity prices in other countries. So by taking 3.1 million 
bushels of corn off the food market this year, we are taking 
about one-tenth of the global corn production off the food 
market this year, and that is having a global impact.
    The IMF estimates that this year our ethanol mandates are 
generally one-half of the increased consumption in cereals. 
Now, we have heard other panelists say that they don't think 
that the ethanol mandates are having an impact on prices, but 
our ethanol mandates are generating half of the increase in 
consumption. More than China, more than other factors, is the 
diversion of corn into ethanol in this country. What is very 
worrisome is that these mandates are scheduled to escalate over 
coming years to approximately double within only a few years so 
the stresses that we are experiencing now could be magnified in 
future years.
    I want to quickly shift to the recommendations, and I see 
my time is up, so I will make this quick. We have a range of 
responses that range from immediate to longer term. The first 
is that we have to deal with the humanitarian crisis and we 
recommend that Congress fully respond to the UN agency's appeal 
for added funds to deal with the higher food prices. The World 
Food Program estimates they need an additional $755 million 
this year just to keep current operations.
    Next, we believe that Congress really needs to sort out the 
impacts that the ethanol mandates are having. There isn't yet 
very good and agreed-upon information about what the 
interrelations are between the environment, the ethanol 
mandates and food prices, and so we recommend something along 
the lines of a blue ribbon commission or a consultation with 
experts to provide a clear analysis and recommendations for 
action, and if the result of that analysis is that biofuel 
mandates are driving up food prices and exacerbating hunger and 
poverty, we think that Congress should act very quickly to 
freeze or even roll back the biofuels mandates.
    The last two recommendations are that if biofuels do offer 
benefits for energy security and for the environment, that we 
should consider making the market fair and open and allowing 
other competitors to compete for our market. Biofuels can offer 
economic benefits and opportunities for developing countries 
and there is no reason why they shouldn't also benefit from 
this new trend in the market.
    [The prepared statement of Mr. Kripke follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
    Mr. Boucher. Mr. Kripke, thank you. Your time is expired.
    I want to thank all of the witnesses for their testimony 
here this afternoon and particularly for your patience in 
awaiting our return from that extended stay on the House Floor.
    Let me begin my questions by simply asking for some 
projections from those who care to make these about the time 
when we can anticipate that cellulosic processes for making 
ethanol will be fully commercially feasible and we can 
anticipate widespread commercial deployment for cellulosic 
ethanol. Dr. Stowers, you and Mr. Kramer perhaps might want to 
go first on this, but others may have some views as well. Dr. 
Stowers?
    Mr. Stowers. Yes. Thank you very much for the question. Our 
current Project LIBERTY, as I indicated before, is scheduled to 
be--to start up in 2011. I think that the stepwise approach to 
Project LIBERTY involves our engineering and beginning our 
construction so we are going through a very methodical approach 
with our DOE funding.
    Mr. Boucher. Well, I understand you are going to start 
making the product in 2011, but as I understand your testimony, 
you are also getting substantial government support for that 
project, and my question is, at what point will cellulosic 
ethanol be able to stand on its own and produce fuel for the 
market that is commercially feasible and competitive with 
petroleum and other sources?
    Mr. Stowers. The concept that we have with Project LIBERTY 
involves--it is a commercial demonstration plant of 25 million 
gallons. Part of our proof of principle at commercial scale 
will be actually the Project LIBERTY itself. One we have 
established that, then the rollout of a Project LIBERTY bolt-on 
to existing facilities is well within our reach. We have, as I 
said, 23 plants operational. By the end of the year we will 
have 27 corn-to-ethanol so we will be able to roll that in 
based on the economics demonstrated at LIBERTY. I can't give 
you an exact rollout of plants per year but it is our intention 
to capture as much of the cellulose ethanol market as we are 
able to do with the technology and do it profitably.
    Mr. Boucher. OK. Well, that is a careful answer. Thank you.
    Mr. Kramer, would you care to comment?
    Mr. Kramer. Sure. Sir, I think the biggest thing for KL, as 
we look at widespread mass production of cellulose-based 
ethanol, we made our first ethanol back in August of 2007 but, 
as I said in my statement, it was privately funded, and the 
revenues from our corn-based technology have dropped and it has 
a lot to do with the fear that is being instilled by the media 
and others that cause the debt and equity markets in the United 
States to shy away from any kind of ethanol, whether it is corn 
or cellulose. So we have real problems. We are ready to go to 
the commercial market as soon as this summer but our business 
development guy, as I sit here today, is in Paris trying to 
raise money to build the first plant in South Dakota. That is 
the problem that we have. It is not a matter of the technology 
being ready or not. It needs to be further developed and 
efficiencies need to be improved, no doubt about that, but the 
point is, is that the fear that is out there against all 
ethanol is causing sources of funds to dry up.
    Mr. Boucher. Do you believe that if you can raise the 
capital that you are currently seeking that it would be 
possible to build a facility and have it be commercially 
successful without any level of government support?
    Mr. Kramer. No, I don't believe that because I do--I 
believe that there still needs to be the same level of support 
that jump-started corn-based ethanol and the oil industry.
    Mr. Boucher. So this would be the 51-cent-per-gallon tax 
benefit?
    Mr. Kramer. I am not going to say specifically. I can't say 
specifically whether the 51-cent would help us or not because 
that is designed for the oil industry to blend it. It is not 
designed for ethanol production. That is, I think, the 
confusion that exists out there, that any of the subsidies that 
ethanol might get is not for producers, it is for blenders, and 
that, I think, is the confusion.
    Mr. Boucher. All right. Let me ask a little different 
question, and Mr. Faber, we will get your comment on this too. 
In the year 2010, current Federal law requires a 100-million-
gallon contribution by cellulosic ethanol as a component of the 
mandate that comes into effect in that year. Can that be met? 
Mr. Dinneen.
    Mr. Dinneen. Mr. Chairman, let me tell you that I believe 
that we will meet that initial target. I have testified in the 
past that there is not a company that I represent that does not 
have a very aggressive cellulose-to-ethanol research program 
and there are several companies working on being able to 
convert fiber, which is already coming into the plant, into 
ethanol, and that is cellulose material. There is a commercial-
scale ethanol facility being constructed today in Georgia, 
Range Fuels, that will be utilizing soft wood, and there are 
many others. You have Verenium, you have Blue Fire that is 
looking to produce ethanol from municipal solid waste. You have 
Iogen, that has announced that they are going to be building a 
plant in Canada later this year. So there is a lot of activity 
and I believe that we will be able to meet those targets. The 
key though that has been suggested is that if you are going to 
have a second-generation ethanol industry, you have to make 
sure that you have not eviscerated the first-generation ethanol 
industry that is providing the foundation from which those 
newer technologies will be able to flourish.
    Mr. Boucher. All right. Let me ask for those who want to 
comment on views of Congresswoman Herseth Sandlin's 
legislation, which was the subject of testimony earlier, that 
would allow biomass harvested from Federal lands, woody 
biomass, to be counted toward the mandate, and the ethanol 
manufactured from that counted toward the mandate. Views on the 
appropriateness of that legislation, pros and cons, anyone want 
to comment? Let us start with Mr. Greene.
    Mr. Greene. As I mentioned in my oral statement, we believe 
that legislation would be very detrimental to the progress of 
making sustainable biofuels. The legislation that passed and 
was signed into law, went from the House to the Senate and 
back, received a lot of attention and does a very careful job 
of including the vast majority of economically available woody 
biomass while protecting our national forests and Federal 
lands, which are an incredibly important reserve of biological 
diversity and standing carbon. Allowing all sorts of other 
material really only excludes from private lands, old growth, 
native grasslands and the conversion from natural forest to 
plantations. You can still use all the material on plantations. 
You can still use all the material from natural forests that 
are naturally managed. You just can't convert it from a natural 
forest to a plantation.
    Mr. Boucher. OK. Well, thank you, Mr. Greene. I gather your 
organization opposes that legislation.
    Mr. Greene. We do.
    Mr. Boucher. Let me just ask you this. If it were somewhat 
more narrowly tailored to assure that if the biomass is 
harvested from the Federal lands for other purposes such as 
natural thinning or just removing deadwood, for example, that 
otherwise would contribute to greenhouse gas emissions as it 
decays, would you have a different view?
    Mr. Greene. Well, no, because----
    Mr. Boucher. OK. Well, that is enough.
    Mr. Greene. But there are good reasons why.
    Mr. Boucher. My time is expiring and I do have one other 
question that I want to pursue, but let me give people on the 
panel a chance to comment with regard to this, if there is 
something. Mr. Kramer?
    Mr. Kramer. Thank you. Again, our plant being in the Black 
Hills and around the national forest, there is 720,000 tons of 
piled up slash that is there already and that came from harvest 
programs based on Federal government mandates. All we are 
asking for is that slash. We are not looking to clear-cut. In 
fact, if you go out behind Mt. Rushmore, you can come out this 
summer and visit South Dakota, you will see the effects of 
thinning the forest makes the old growth healthy. So our angle 
is to go after what has already been harvested. That is all.
    Mr. Boucher. Let me just get you to respond to one thing 
that I believe Mr. Greene made as a point, and that is that if 
you permit that material off of Federal forest lands to be 
utilized, that utilization might interfere with the orderly 
development of a feedstock market, the growing perhaps of 
switchgrass or other kinds of things that might be devoted to 
cellulosic ethanol production. Do you want to comment with 
respect to that suggestion?
    Mr. Kramer. I think the point that I would make there is 
that there is enough biomass, and again, I will refer to the 
billion-ton study that was done by DOE, to go around for 
everyone and I think there wouldn't be a creeping effect 
because our--we are as much of stewards of the environment as 
anybody but I don't believe that it would create a competition 
or an effect on the market.
    Mr. Boucher. OK. Well, my time expired long ago and the 
Chair intends to be very generous with other members in terms 
of their use of time as well. So at this time I would be happy 
to recognize Mr. Upton.
    Mr. Upton. Well, I thank you, Mr. Chairman. I have just a 
couple of questions. I have a big group that is waiting for me 
so I am going to maybe not use all my time. I will yield some 
time back.
    A couple questions I have. By the way, Dr. Stowers, I have 
a district that I have always viewed as a microcosm of the 
county in lots of different ways and I have one particular 
county that is rumored to have 10 times more hogs than people, 
all right? How are they going to like the idea of another draw 
from the corncobs that those hogs are going to otherwise gobble 
up? Are they going to be OK with that?
    Mr. Stowers. Well, the corncobs that we will be using are 
corncobs that are typically left on the field and that is part 
of----
    Mr. Upton. A lot of these hogs are outside.
    Mr. Stowers. Again, we will be collecting cobs 
simultaneously with the collection of grain and those are 
typically the cobs that are left on the field, so we don't see 
that impacting that area of Michigan in particular.
    Mr. Upton. Now, my science tells me that sugar, 
particularly as you look at Brazil, Brazilian sugarcane has 
been a phenomenal source of making ethanol, particularly in 
Brazil. How does the sugar component compare in terms of the 
quality of the ethanol as compared to corncobs? Have you looked 
at that at all?
    Mr. Stowers. Well, in terms of the ethanol is ethanol, so 
the quality of the end product should be the same. It is all a 
matter of getting that ethanol to the markets, being able to 
produce that here domestically, being able to offset the 
foreign oil that we currently purchase for our transportation 
fuels.
    Mr. Upton. Now, it is my understanding that of course we 
have I think what is a 54-cent tariff on out-of-country or 
exports coming into this country per gallon. It is estimated 
that I think the subsidy for ethanol domestic producers is 
about 51 cents a gallon. We have seen, as you indicated, 
somebody indicated, I think Mr. Dinneen indicated that the 
price of oil went up $2 just since this hearing started this 
morning per barrel. I would like to know each of your 
perspectives in terms of should Congress look at both repealing 
the tariff--I don't suspect that there is a lot of ethanol that 
comes in, maybe it is because of the tariff--and also 
suspending the subsidy on ethanol, knowing full well that the 
price is going up as it meets that market test. So either a 
yes-yes, a yes-no, a no-no, whatever. Mr. Greene, we will start 
and go right down the panel. Should we get rid of both these 
subsidies, in your view, or not?
    Mr. Greene. As I said during my oral testimony, I think we 
need to reform both of them and make them both performance-
based.
    Mr. Upton. Mr. Dinneen?
    Mr. Dinneen. No, no, but there is a longer answer, and that 
is, it just depends on whether or not you want to subsidize 
Brazilian sugarcane growers and Brazilian ethanol because the 
tax incentive that is available to refiners for ethanol use 
goes to those refiners whether the product is imported or 
domestic. So if you would remove the secondary tariff, which 
simply offsets the benefit that they would then receive, we are 
now subsidizing Brazil. And I am not really sure that that 
makes a great deal of sense, particularly at a time when we are 
trying to reform our own farm policies.
    Mr. Upton. Mr. Drevna?
    Mr. Drevna. Sir, yes, yes, and I find it intriguing that it 
is no-no but it is our tax benefit that Mr. Dinneen keeps 
telling us that we get. So logic would indicate that it would 
be yes over there and no here if we got it. That subsidy, that 
direct 51-cent-a-gallon subsidy is directly impacted by the--
directly taking into account on the price of every gallon of 
ethanol. That is when I suggested the earlier comment where 
ethanol is cheaper than gasoline doesn't--it can't be. If you 
take away that 51-cent-a-gallon subsidy and you consider the 
BTU difference, it is a lot more expensive.
    Mr. Dinneen. That is simply not true.
    Mr. Upton. There is a reason why we put you together.
    Mr. Kramer, I am running out of time so----
    Mr. Kramer. Yes, sir. Very quickly, I do believe that the 
mandate should stay in place and the incentives should stay in 
place. However, my caveat is, they shouldn't stay around 
forever, and as we go through 2022, a stepped reduction in the 
way that the technology develops, I think that is what we are 
trying to get to, should be maintained to allow us that jump 
start that we had with corn through the cellulose time.
    Mr. Upton. Mr. Faber?
    Mr. Faber. Yes, we should eliminate the tariff to address 
record food inflation and we should reform the tax credit to 
make it much more attractive to bring cellulosic ethanol to 
commercial scale very quickly.
    Just to answer Mr. Boucher's question, we expect about 2 
billion gallons to be online of cellulosic ethanol between now 
and 2014, so it is important to remember it took 20 years for 
these guys to bring their first 2 billion gallons on, so that 
is a pretty good lead time.
    Mr. Tolman. We would agree with the ethanol industry and 
say no, no. In fact, there is not record food price inflation. 
It is high but not record. I will just add that we do import 
significant quantities of ethanol, I think in the range of 650 
million gallons this past year. It has been up as high as 
nearly 1 billion through the Caribbean basin.
    Mr. Stowers. We would be no, no. We believe that a strong 
corn-to-ethanol industry is imperative for a strong cellulose-
to-ethanol base and achieving the RFS as passed last year.
    Mr. Kripke. We would say probably, probably. It needs a bit 
of evaluation, and I think the law of unintended consequences 
is prevailing today in some of the policies already taken. I 
think we need to do some careful evaluation of both measures 
before taking any steps forward.
    Mr. Upton. I know my time is expired. Thank you, Mr. 
Chairman.
    Mr. Boucher. Thank you very much, Mr. Upton.
    The gentleman from Washington State, Mr. Inslee, is 
recognized for 5 minutes.
    Mr. Inslee. Thank you. I just thought of kind of a 
provocative question. I haven't thought through whether I 
should ask it or not but here goes. We have these significant 
Federal policies for biofuels. I have been a supporter and I am 
a particular champion of the advance of cellulosic ethanol. I 
think that has a significant future for our country and I want 
to hasten that transition to the second and third and get to 
algae-based biodiesels and the whole 9 yards. But I was in 
California yesterday talking to some entrepreneurs who are just 
doing all of these incredible low- and zero-carbon 
technologies--enhanced geothermal, solar thermal power, 
advanced photovoltaics. I guess the question is, would anyone 
on the panel say there is a reason not to provide these other 
low-carbon and zero-carbon potential industries equivalent 
treatment to biofuels? Is there any reason not do to that?
    Mr. Faber. I think anybody who has looked even--certainly 
not as much as you have, Mr. Inslee, but anybody who has looked 
at the energy supply-and-demand problems that this country 
faces realizes that we should be trying to provide generous 
incentives to get these true green technologies to commercial 
scale as quickly as possible, and that would go for solar, 
wind, geothermal, et cetera. I think there is a critical lack 
of investment. Certainly that is true in cellulosic ethanol 
where we are--hopefully that will be addressed probably through 
the Farm Bill but we need--I think it was Mr. Rogers who said 
we need sort of a man on the moon sort of level of investment 
in R&D, loan guarantees, incentives and so on to get cellulosic 
to commercial scale as quickly as possible so that we are not 
pitting our hunger needs against our energy needs.
    Mr. Inslee. Mr. Dinneen?
    Mr. Dinneen. Just to give me the opportunity to agree for 
once with Mr. Faber, I will say yes, we have to have all 
sources of renewable energy to address the critical problems we 
are facing. Again, $122-a-barrel oil. We can't be saying no to 
anything right now.
    Mr. Inslee. So I hope you will all put your shoulders to 
the wheel for other industries as well and particularly the 
investment tax credit and the production tax credit we are 
struggling to get extended that is going to expire this 
December, and if you have a chance to talk to anyone with clout 
in Washington, D.C., we hope that you will do so, even though 
it is not exactly in your job description.
    I want to address this issue of food prices. You know, we 
hear such disparate economists' evaluations of this. My own 
take is that my sense is that I think there are much larger 
forces dealing with food prices that are probably the larger 
bulk of the reason for food run-up than biofuels. That is my 
own kind of take from where I am sitting, and the reason I say 
that, I was listening to George Soros talk the other night 
about the flight of capital from currency speculation into 
commodity speculation that drives up demand for commodity 
speculators and that demand, the real demand is from 
speculators as much as eaters. Now, we have increased demands 
of people in China wanting to eat beef, which takes more grain, 
and world population going up and everything else, but it is 
something I hadn't really tumbled to and so you have George 
Soros saying it is not biofuels policy, it is change in 
speculation from currency speculators with the collapse of the 
dollar into commodities. I also have trouble buying that a very 
small number of acres in the United States, which is just a 
portion of the food supply can cause this radical increase in 
multiple products. You know, we have food riots about rice and 
I know there is some transfer from grain to grain but I just 
have a hard time believing that our biofuels policy has caused 
these huge spikes in rice prices causing food riots. So at 
least from where I am sitting, I am seeing the bulk of it 
caused by gas prices, increasing demand, or in currency 
speculation, increasing demand with population and people 
eating more meat, frankly, around the world. So I am just 
asking for people to comment on that. Mr. Faber is anxious.
    Mr. Faber. I will start by saying that there are many 
factors that are driving food prices as high as they are and 
certainly commodity speculation is one of them, the weak 
dollar, export restrictions. Probably one of the most, if not 
the most significant is simply global demand, that we are 
seeing a huge increase in demand for these coarse grains 
greatly exceeding our capacity to increase our yields. In fact, 
yields over time are falling on average and now they are 
increasing about 1, 1.2 percent a year. So if you look at the 
long-term, long-run projections that USDA put out just this 
last week and when you look at how much demand is going to 
increase because of rising living standards in places like 
China and India, you really start to worry that we are moving 
into a period of significantly higher commodity prices across 
the board. Then you have to ask the question, why would we make 
that worse by diverting 40 percent of our corn and 30 percent 
of our vegetable oils into our fuel supplies. It is not a 
question of how much our biofuels policies or food-to-fuel 
policies are contributing to this. Clearly there are different 
estimates. The President at one point said 15 percent. EPRI 
said 25 to 33 percent. You would probably get five different 
economists to give you five different answers. The real 
question is, given what we are seeing in the next 5 years, 5 to 
10 years with global agricultural demand compared with likely 
increases in yields, does it make sense to then go over and 
above that and divert so much of these basic commodities out of 
our food supply and into our fuel supplies? We would clearly 
argue it doesn't. Given what we are seeing with ending stocks, 
what we are seeing with sort of an increase in uptick in global 
hunger, you know, we simply can't afford--the global family 
can't afford to divert this much food into our fuel supplies.
    Mr. Inslee. I will just give you one perspective--oh, my 
time is up. I am sorry.
    Mr. Boucher. If you want to ask another question, go ahead.
    Mr. Inslee. I was going to make more of a comment. Would 
you allow comment? I am going to indulge the Chair. Just one 
perspective. I think that is a very important question. Just 
from where I am sitting, if these policies drive us to the 
second and third generation of biofuels, which if we play it 
right I believe that they will, and if that achieves some 
reduction of global warming, which prevents the devastation of 
our food production capability, which I believe will occur if 
we don't make a transfer off of carbon, I think it is a more 
complicated question than that, and just one member thinks we 
should continue leading this work to advance biofuels.
    Mr. Dinneen. Congressman, if I could just really quickly--
because you are absolutely right. The causes of food price 
inflation are extremely complex. The single-most important 
cause of food price inflation is $122-a-barrel oil, and the 
only thing that we have got going to reduce the cost of crude 
oil and the price of gasoline is the use of renewable fuels in 
this country, and if you eliminate renewable fuels, you will 
drive gasoline prices up further and you will drive food prices 
up much further.
    Mr. Inslee. Thank you.
    Thank you, Mr. Chair.
    Mr. Boucher. Thank you very much, Mr. Inslee.
    The gentleman from Oklahoma, Mr. Sullivan, is recognized 
for 5 minutes.
    Mr. Sullivan. Thank you, Mr. Chairman.
    My first question is for Mr. Kripke. You propose rolling 
back the renewable fuels standard to avoid large diversions of 
corn and other food supplies from the market. Do you believe 
that if we fail to accomplish this rollback, that hunger caused 
by food-to-fuel diversion will actually be measurable in 
incidences of malnutrition and death? Is it already happening, 
and where on earth is that happening, if it is?
    Mr. Kripke. Thank you, Congressman. We haven't made a 
specific recommendation about rolling back. We do believe it 
needs more study but we are concerned about the diversion of 
food to fuel and we do believe it will drive poverty and 
hunger. Right now the most observable impacts of the food price 
inflation, which is significantly contributed to by this 
diversion of food, is observable in food aid programs where 
food aid programmers or implementing agencies are not able to 
provide the actual food delivery and so you are seeing cutoffs 
of 450,000 children from school feeding programs in Cambodia, 
for example, or many other agencies cutting off millions of 
people from food aid. So those people presumably are going to 
have nutrition problems and we are seeing that across the world 
but especially in Asia and Africa. So I think the--as yet we 
have not observed hunger on the increase but we are expecting 
it because it is simple arithmetic that if income doesn't rise 
as far as food does, then poverty increases and food insecurity 
comes. So that is probably not exactly what you wanted to hear 
but that is what we have right now.
    Mr. Sullivan. Are these children that are being--are they 
being totally cut off or are they just going to less nutritious 
food sources?
    Mr. Kripke. The World Food Program announced that in May 
they will cut off some of their programs in Cambodia and other 
places and the contingencies I am not sure about, whether they 
will have some alternatives, but I suspect not.
    Mr. Sullivan. So these children are being totally cut off?
    Mr. Kripke. Yes.
    Mr. Sullivan. Mr. Drevna, how are you, sir? I have a 
question for you. Your testimony does not touch on other 
alternatives to unstable foreign oil. Does the NPRA believe 
that there is a role for, let us say, coal-to-liquid fuel or 
compressed natural gas?
    Mr. Drevna. Oh, absolutely, Congressman. You know, if we go 
back about 2 hours ago and listen to what Mr. Rogers, his 
opening statement, I think he pretty much summed up what the 
state of the union is right now, and even Bob had mentioned, 
you know, we need all sorts of supply. We need nuke, we need 
coal, coal-to-liquids, and we need biofuels. The problem comes 
in is when you mandate, you know, large volumes of things that 
really don't exist today in commercial quantities, and you 
mandate them and the penalty will be paid by refiners and other 
obligated parties for not meeting a requirement that somebody 
else has not met. That is the problem. The second problem that 
we see is, even if these things come into existence, the front-
loaded volumes of these fuels, once we pass E10, and which is 
going to be very shortly, most people are talking about E, you 
know, 2010, 2011, how are the 250 million legacy vehicles in 
this country going to run on E11, E12, E15, E20? They are not 
going to be warranteed by the auto manufacturers. Are we going 
to tell 250 million Americans who own automobiles to go out and 
buy new ones because we have to figure out how to force-fit E15 
and E20 into the marketplace? These are the kind of things that 
we have been talking about over the years as this type of 
legislation has emanated. We are in full support, we being 
NRPA, the refiners, the oil and natural gas industries, of 
biofuels but we do say let the market figure out where best to 
use them, how to use them, when to use them.
    Mr. Sullivan. And be more realistic about it.
    Mr. Drevna. I guess that sums it up in one word, yes. Thank 
you.
    Mr. Sullivan. Also Mr. Drevna, what is your response to the 
claim that gas prices would be even higher if it were not for 
the RFS?
    Mr. Drevna. Well, I think there are two responses to that. 
If you look at historic oil prices, crude oil prices versus 
gasoline prices, they tend to track pretty closely. What you 
are seeing right now is a huge divergence. The oil price at 
$120, $122 a barrel and what you are seeing at the retail 
stations today do not track. There is a much larger delta than 
one would expect. Now, why is that? That is because in the 
beginning of 2008, inventories of gasoline are at a 5-year 
high. Remember last year or the year before, those inventories 
were much lower and the prices spiked a lot higher. So yes, are 
gasoline prices high today? Absolutely. Are they as high as 
they would be given the fact where crude oil is today? 
Absolutely not. So it is not that ethanol is being put into the 
mix. I mean, if you really look at what the cost of ethanol is, 
again, as I said previously, on a BTU basis, it is 30 percent 
more because of simply the BTUs. You take away that tax credit 
and it is uneconomical.
    Mr. Sullivan. Thank you, Mr. Drevna.
    Mr. Boucher. Thank you very much, Mr. Sullivan.
    Under the rules of the committee, we need to go to Mr. 
Shimkus next and take questions from subcommittee members 
before turning to those who are not subcommittee members, so 
Mr. Shimkus from Illinois for 5 minutes.
    Mr. Shimkus. Thank you, Mr. Chairman, and I appreciate that 
and my good friend, Gene Green.
    I guess--I have been in and out like everybody in a lot of 
different hearings. The hearing is basically about the food-
fuel debate. I think it has been clearly--USA Today did an 
editorial a couple days ago that said weather, energy costs, 
changing habits, renewable fuel--that was the four reasons. 
Renewable fuel was one. One of three other things was 
environment, drought, energy costs. And it was quoted to me 
last week that for commodity product to get out of the field, 
which I have a lot of them, to the grocer's shelf, travels 
about 1,500 miles to 2,000 miles at double the cost of diesel 
today. That has got to have a major impact on the high cost. We 
have--you have heard my ranting and raving over the past couple 
weeks. The frustrating thing from those of us who are supply 
guys, I am a more-is-better guy, Mr. Green. Because if you had 
more, then they could compete in the market and it would drive 
down costs. But when we talk about the ability for people to 
pay for food around the world, it is just like the LIHEAP 
debate. We don't explore our own resources so the demand goes 
up, so it costs more to heat your homes, so then we taxpayers 
have to pay to help the people who can't afford home heating. 
Now, here we have the same equation. We won't go to our natural 
resources. We don't go to the OCS, Outer Continental Shelf. I 
have got the numbers of how much oil and natural gas is there. 
Whether it is the East Coast or the West Coast or the West Gulf 
or the East Gulf, or we won't go to ANWR to bring in these 
reserves so that we have an inflated price for crude oil, and I 
have the chart. It is $122. That is right. That is the quote 
right now, $122 a barrel. That spikes diesel costs, which 
pushes higher food costs, which then we now have to pay more 
taxpayers' dollars to help people subsidize their food costs. 
Wouldn't a better opportunity be to help push and drive down 
fuel costs by bringing on more supply? More supply.
    Mr. Drevna, you represent the refiners. How can we justify 
not--why haven't we built a new refinery in this country in 
30--what is it, 32 years? A new one from ground level. We have 
expanded, but haven't we built a new one?
    Mr. Drevna. Well, I mean, it comes down to siting and cost.
    Mr. Shimkus. Siting and cost?
    Mr. Drevna. Yes, and one thing--I mean, the things we have 
done, Congressman, you and I have had some discussions about 
this in the past is that if you look at the statistics, we as 
an industry have been adding the equivalent of one new world-
class refinery per year for the past 12 to 14 years.
    Mr. Shimkus. And I appreciate that, because I visited the 
ConocoPhillips refinery down in Wood River. They are the size 
of the four other refineries that used to stand there. I 
never--and I appreciate that expansion but my point being, in 
the 2005 energy bill when we would not move to incentivize new 
refineries, and you heard my opening statement that we are 
importing refined product, that ought to make you feel good. As 
a guy who represents refiners and the companies and the people 
that work those jobs, that we lose that capital, we lose that 
siting, we lost that tax base because we are importing refined 
product. That is nuts. So what do we do? We incentivize 
renewable fuels. We send a signal. We have 147 ethanol plants 
from the ground up and now we want to send a signal, oh, no, 
markets, we want to stop. How many of your refineries now have 
the biofuels--you say you supported it. How many are actively 
involved in producing ethanol or biodiesel portion of the 
refineries?
    Mr. Drevna. Sir, I am going to have to get back to you on 
that, on exact statistics, but rest assured, this industry has 
devoted a lot of research and a lot of capital into producing 
biodiesel at the refineries on the front end.
    Mr. Shimkus. Biodiesel?
    Mr. Drevna. Biodiesel, yes.
    Mr. Shimkus. Which, you know, we started one in May 1988 
including that in the EPAct and which it was our legislation 
that came through this committee.
    Mr. Drevna. But again, I can emphasize that it is going to 
take a whole menu of options, and you referenced the Outer 
Continental Shelf, both for oil and natural gas, and the same 
could be said for some lands that have been artificially kept 
out of development, you know, on land. Thirty-five years ago, 
40 years ago, maybe that was the right thing to do, not with 
today's technologies. We could produce that very 
environmentally sound.
    Mr. Shimkus. I would concur, and if one message is to be 
sent from this is to make sure that you don't have one bad 
actor, and I don't think we have really decided this, whether 
energy input, changing habits and renewable fuels has driven up 
the cost of commodity products. But if we get a control with a 
national energy policy that talks about supply and we look at 
the East Coast, the 2.31 billion barrels of oil there, and the 
24.05 trillion cubic feet of natural gas, the eastern gulf of 
3.5 billion barrels of oil and the 12.31 trillion cubic feet of 
natural gas or the West Coast with 10.71 billion barrels of oil 
and 18.95 trillion cubic feet of natural gas, that is not even 
talking about ANWR, that that supply has to be made accessible 
so that we drive the cost of everything down, which would drive 
the cost down of food.
    Mr. Chairman, you know my positions on supply and I am just 
trying to reiterate it. Thank you.
    Mr. Boucher. Thank you very much, Mr. Shimkus.
    The gentleman from Texas, Mr. Green, is recognized for 5 
minutes.
    Mr. Green. Thank you, Mr. Chairman, and it is great to 
follow my colleague from Illinois, who does have refiners and 
refineries in Illinois, because I am familiar with them, but 
coming from the area I have in Houston, we have a whole lot of 
them. But we also produce in the western gulf. It is the 
eastern gulf that we are having trouble with that is off 
Florida. We produce off of the western gulf in Texas a great 
deal of product.
    Mr. Dinneen, let me ask you, because I have heard some 
questions earlier and I would like to have testimony on the 
studies of the efficiency or the BTU equivalent of ethanol 
versus gasoline. I have heard 25 percent, 30 percent. Is the 
efficiency or the BTU ratio for a gallon of ethanol in 
relationship to gasoline, what does Renewable Fuels Association 
have?
    Mr. Dinneen. Good today and improving all the time and 
certainly much, much better than $120-a-barrel crude oil.
    Mr. Green. Oh, no, I am talking about the efficiency, 
because I have heard it is 80 percent or 75 percent of a gallon 
of gasoline.
    Mr. Dinneen. Energy in, energy out, you get 80 percent----
    Mr. Green. How much do I get if I put ethanol----
    Mr. Dinneen. With ethanol you get, according to the latest 
DOE analysis, 1.64 BTUs for every BTU that goes into the 
production of the ethanol. But as I said, we are getting better 
all the time. Oregon National Labs just a couple of weeks ago 
released a study from an analysis, a survey of the industry 
that showed just in the last 4 years, Congressman, dry mill 
ethanol plants have improved their energy efficiency by some 22 
percent. With each new ethanol plant that opens up, and they 
are opening up all the time including some in Texas, they are 
using the most efficient technology and our energy balance is 
improving every day.
    Mr. Green. Well, what I am trying to do is, if I buy a 
gallon of ethanol and put it in my Chevy Tahoe and I buy a 
gallon of gasoline, the efficiency of that gallon of gasoline. 
I know the refineries are getting more efficient. In fact, we 
do have oil refineries that are much more efficient today and 
are getting better every day too, but what is that equivalent?
    Mr. Dinneen. It is roughly 76, 77 percent on a BTU basis. 
Now, it is important, though, to recognize that ethanol is 
going to burn more efficiently than gasoline but nonetheless, 
if you are utilizing ethanol as your replacement to gasoline, 
you are going to have fewer BTUs.
    Mr. Green. Well, then at 76, 77 percent, that is with what 
I understand, and I have an E85 pump in my district that I get 
to look at every once in a while, and I notice----
    Mr. Dinneen. It is a lot cheaper than gasoline, isn't it?
    Mr. Green. About 40 cents, and if you factor in $3, and in 
Texas it is $3.49 or $3.50 a gallon, and, you know, if you 
factor in that, it is less efficient.
    Mr. Dinneen. Well, typically the refiners or the marketers 
will price the ethanol to be cost-competitive on a BTU-adjusted 
basis. The E85 pump that I go to, it is about 45, 50 cent 
cheaper and the flexible fuel vehicle I drive, it certainly 
gets better mileage on a dollar-in basis than with gasoline.
    Mr. Green. Let me ask Mr. Drevna, is that the same 
information that you have?
    Mr. Drevna. On the BTU value, that is correct. It is a lot 
less BTUs per gallon of ethanol. I didn't realize that we 
priced the ethanol though. I thought the ethanol producer did, 
but----
    Mr. Dinneen. The gasoline marketers that are selling the 
E85 are selling it and those are the members. I will introduce 
you----
    Mr. Green. OK----
    Mr. Drevna. But anyway, when you factor in that E85, the 
number of automobiles that can actually take E85 are, what, 4 
to 6 million or something like that on the road today, when you 
factor in the fact that although our domestic auto 
manufacturers have indicated they are going to increase 
production of E85 vehicles over the next few years but still 
produce gasoline-only vehicles at a rate of about 6 to 7 or 8 
to 1, we are still going to have to figure out how we are going 
to do anything over E10 for the long term.
    Mr. Green. Can the members of your association meet the 
mandate for RFS that was mandated in the 2007 energy bill?
    Mr. Drevna. We have--there are two or three problems we 
have, Congressman Green. One is, even if the large volumes, 9 
billion gallons in 2008, 11 billion gallons in 2009, even if 
they are produced, which, again, I think is still a question, 
the other part is, how is--the infrastructure. How are we going 
to get that to the blending facilities? We haven't figured that 
out yet. And if we don't meet it, we are the ones that are 
penalized. So the jury is out on that. We are very concerned, 
and if you heard the testimony from Mr. Meyers this morning, 
that is one of the problems the EPA is having and how we are 
going to implement these rules.
    Mr. Green. Mr. Chairman, I know I am out of time and we 
have a vote call, but I asked a question earlier of the EPA on 
the RFS requirements, the study requirements, and I would like 
to ask if the results of these studies are found to be negative 
harmful impacts on the industries or the environment, would 
they be willing to require the EPA to adjust the mandate to 
prevent unintended consequences that may have been done in the 
2007 energy bill. Is that--just in the brief period of time we 
have, is there a feeling that we ought to be able to have that 
mandate instead of just EPA being willing to consider it?
    Mr. Drevna. I think our testimony is that we should take a 
long, deep breath as a Nation, look at what the art of the 
possible is, not what we want to do, what we can do, and I 
think if you look at the 2007 Energy Independence and Security 
Act, it is what we would want to do, far from what we can do 
today.
    Mr. Dinneen. And I would hope that we would want to take 
just as close a look at the environmental and health impacts of 
increased gasoline supply coming from Canada and the tar sands 
because if there isn't ethanol, where are we going to get this 
increased fuel supply? More and more of it is going to come 
from much more environmentally sensitive parts of the globe.
    Mr. Green. Mr. Chairman, I understand we do import a lot of 
oil from tar sands but I don't know of any refined product that 
we are getting from up there, because typically that comes to 
our refineries in Illinois and maybe even Texas if we can get 
some pipelines there.
    Mr. Faber. I would just add, Mr. Green, that I do agree 
that we need to revisit the mandate and figure out how much we 
can really afford to divert from our food supplies into our 
fuel supplies, not just this year but in the next few years. I 
think a really important point that has been missed here is 
that in the short, medium, and long run, corn ethanol is not 
going to be able to displace very much of our gasoline supplies 
or ultimately impact the price of gas very much. It is 
cellulosic ethanol and the enormous amount of biomass that 
holds a lot more potential in the long run, and the decision to 
divert either--whether it is 6.5, 7, 8, or 9 billion gallons in 
2008, whatever that number is will have no effect whatsoever on 
the development of those second generation of fuels. I concede 
that if you got rid of all the mandates entirely, that would 
have a detrimental impact on the development of these second-
generation fuels, but if Congress decided to divert 6.5 or 7 
billion gallons instead of 9 this year, good lord, I don't 
think that will have any impact on whether Wall Street decides 
to bet on Vinod Khosla or something else, so----
    Mr. Boucher. Thank you very much, Mr. Green, and again 
thanks to all of the members of this panel for joining us here 
today. We, I think, have learned a lot as a consequence of 
today's hearing and we will consider whether or not additional 
testimony will be necessary as we continue our evaluation of 
questions relating to biofuels. There may be additional 
questions that members of this committee have to those who have 
testified here today, in which case they will be submitting in 
writing, and we will keep this record open for a brief period 
of time for questions to be submitted to you by others and for 
your responses.
    So with the Chair's thanks, this hearing stands adjourned.
    [Whereupon, at 3:30 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                   Statement of Hon. John D. Dingell

    Mr. Chairman, thank you for convening this important and 
timely hearing. We are here today to examine our biofuels 
policy from several standpoints.
    First, what progress has the Environmental Protection 
Agency (EPA) made in implementing the Renewable Fuels Standard 
(RFS)?
    The original RFS was enacted as part of the Energy Policy 
Act of 2005. It was expanded under the Energy Independence and 
Security Act of 2007 (EISA) which directs EPA to finalize many 
of the rules required to implement the new elements of this 
program by December 2008. The Agency did a commendable job in 
implementing the first RFS and was widely praised for the 
balanced way it pursued consensus, consistent with the law. We 
expect it will do the same in this instance.
    The new RFS contained in EISA is an aggressive approach to 
biofuels policy. It attempts to both accelerate deployment of 
traditional ethanol and hasten the arrival of cellulosic 
biofuels, while balancing the need to reduce greenhouse gas 
emissions with the need for EPA to grant waivers should 
unforeseen events arise. Whether the Act's goals will be 
realized remains to be seen. In the meantime, this committee 
must be vigilant in its oversight of the program to see how 
close, or far, we are to achieving those goals.
    I would observe that the ink had hardly dried on this new 
law when the clamoring began to alter the RFS, and these 
requests for congressional intervention continue. In my view, 
amendments to the law at this time would be unwise and could 
lead to unintended consequences.
    I believe that all stakeholders would be well-advised to 
consult with the EPA as it develops the rule and try to address 
any concerns within that forum. If unresolved issues still 
remain after the rule is finalized, there may be need for 
congressional action. To act in advance of that date, however, 
undermines important processes.
    Second, this hearing will examine many of the recent 
questions raised about biofuels, including the following: the 
effects of RFS on grain and food prices; the interaction 
between the price of oil and increased food prices; the role 
ethanol plays in the retail price of gasoline; the impact that 
increased biofuels production could have on the environment, 
particularly through land use changes; and how biofuels policy 
affects issues of hunger and poverty.
    Biofuels policy impacts a broad range of crucial global 
issues, requiring us to be vigilant toward the potential 
consequences of these policies. I look forward to the insights 
from our witnesses on these matters and appreciate their 
appearance before the Subcommittee today.
                              ----------                              


            Statement of Hon. Charles W. ``Chip'' Pickering

    Thank you, Mr. Chairman, for the chance to discuss The 
Renewable Fuels Standard and its implementation and 
opportunities.
    My colleagues on both sides of the aisle worked together to 
craft the original framework for a renewable fuels standard in 
the 2005 energy bill.
    With its passage and implementation, we put our country on 
a path to cultivate and depend on its own energy resources, 
ranging from the traditional source in coal to the alternative 
in woody biomass.
    Industry response was evident: nuclear enjoyed a resurgence 
in new license applications; corn-based ethanol facilities 
increased production; automobiles became more efficient.
    To supplement these efforts, Congress should focus on 
technology incentives to speed the development of additional 
energy sources that improve the quality of lives, not increase 
the cost of living.
    In my district, Mississippi State University is currently 
working on two technologies that offer viable long-term 
solutions.
    The first project is using woody biomass to produce 
cellulosic ethanol from syngas. The supply of wood-waste is 
vast and would not compete within its industry or with our food 
supply.
    Currently, the 2007 energy bill does not recognize forest 
biomass in its definition and excluding it leaves out a 
tremendous energy source.
    Including forest biomass in Section 201 of last year's 
energy bill could increase cellulosic ethanol production on 
schedule with its mandate. Additionally, it offers the public 
reduced wildfire risk, reduced insect infestations, improved 
wildlife habitat for outdoor recreation, and a new market 
opportunity for the family forest owner.
    A second technology Congress should consider is the 
conversion process of wastewater to biocrude.
    Municipal wastewater presents numerous opportunities as a 
fuel source.
    It also works outside our food supply and offers 
substantial economic and environmental opportunities for 
metropolitan areas and defense installations around the world.
    Wastewater facilities are ideally suited to produce 
biocrude on a large scale. It can be refined into renewable 
propane and diesel and utilize the existing petroleum transport 
infrastructure.
    I hope our committee and this Congress will continue to 
work together to advance alternative fuel production and thank 
you, Mr. Chairman, for my time.
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