[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
FULL COMMITTEE HEARING ON
THE STATE OF THE RENEWABLE FUELS INDUSTRY
IN THE CURRENT ECONOMY
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
MARCH 4, 2009
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 111-007
Available via the GPO Website: http://www.access.gpo.gov/congress/house
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA M. VELAZQUEZ, New York, Chairwoman
DENNIS MOORE, Kansas
HEATH SHULER, North Carolina
KATHY DAHLKEMPER, Pennsylvania
KURT SCHRADER, Oregon
ANN KIRKPATRICK, Arizona
GLENN NYE, Virginia
MICHAEL MICHAUD, Maine
MELISSA BEAN, Illinois
DAN LIPINSKI, Illinois
JASON ALTMIRE, Pennsylvania
YVETTE CLARKE, New York
BRAD ELLSWORTH, Indiana
JOE SESTAK, Pennsylvania
BOBBY BRIGHT, Alabama
PARKER GRIFFITH, Alabama
DEBORAH HALVORSON, Illinois
SAM GRAVES, Missouri, Ranking Member
ROSCOE G. BARTLETT, Maryland
W. TODD AKIN, Missouri
STEVE KING, Iowa
LYNN A. WESTMORELAND, Georgia
LOUIE GOHMERT, Texas
MARY FALLIN, Oklahoma
VERN BUCHANAN, Florida
BLAINE LUETKEMEYER, Missouri
AARON SCHOCK, Illinois
GLENN THOMPSON, Pennsylvania
MIKE COFFMAN, Colorado
Michael Day, Majority Staff Director
Adam Minehardt, Deputy Staff Director
Tim Slattery, Chief Counsel
Karen Haas, Minority Staff Director
.........................................................
(ii)
STANDING SUBCOMMITTEES
______
Subcommittee on Contracting and Technology
GLENN NYE, Virginia, Chairman
YVETTE CLARKE, New York AARON SCHOCK, Illinois, Ranking
BRAD ELLSWORTH, Indiana ROSCOE BARTLETT, Maryland
KURT SCHRADER, Oregon TODD AKIN, Missouri
DEBORAH HALVORSON, Illinois MARY FALLIN, Oklahoma
MELISSA BEAN, Illinois GLENN THOMPSON, Pennsylvania
JOE SESTAK, Pennsylvania
PARKER GRIFFITH, Alabama
______
Subcommittee on Finance and Tax
KURT SCHRADER, Oregon, Chairman
DENNIS MOORE, Kansas VERN BUCHANAN, Florida, Ranking
ANN KIRKPATRICK, Arizona STEVE KING, Iowa
MELISSA BEAN, Illinois TODD AKIN, Missouri
JOE SESTAK, Pennsylvania BLAINE LUETKEMEYER, Missouri
DEBORAH HALVORSON, Illinois MIKE COFFMAN, Colorado
GLENN NYE, Virginia
MICHAEL MICHAUD, Maine
______
Subcommittee on Investigations and Oversight
JASON ALTMIRE, Pennsylvania, Chairman
HEATH SHULER, North Carolina MARY FALLIN, Oklahoma, Ranking
BRAD ELLSWORTH, Indiana LOUIE GOHMERT, Texas
PARKER GRIFFITH, Alabama
(iii)
Subcommittee on Regulations and Healthcare
KATHY DAHLKEMPER, Pennsylvania, Chairwoman
DAN LIPINSKI, Illinois LYNN WESTMORELAND, Georgia,
PARKER GRIFFITH, Alabama Ranking
MELISSA BEAN, Illinois STEVE KING, Iowa
JASON ALTMIRE, Pennsylvania VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania GLENN THOMPSON, Pennsylvania
BOBBY BRIGHT, Alabama MIKE COFFMAN, Colorado
______
Subcommittee on Rural Development, Entrepreneurship and Trade
HEATH SHULER, Pennsylvania, Chairman
MICHAEL MICHAUD, Maine BLAINE LUETKEMEYER, Missouri,
BOBBY BRIGHT, Alabama Ranking
KATHY DAHLKEMPER, Pennsylvania STEVE KING, Iowa
ANN KIRKPATRICK, Arizona AARON SCHOCK, Illinois
YVETTE CLARKE, New York GLENN THOMPSON, Pennsylvania
(iv)
C O N T E N T S
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OPENING STATEMENTS
Page
Velazquez, Hon. Nydia M.......................................... 1
Graves, Hon. Sam................................................. 2
WITNESSES
Kimpel, Mr. Nathan, President, New Energy Corp., South Bend, IN.. 3
Howe, Mr. John,Vice President of Public Affairs, Verenium
Corporation, Cambridge, MA..................................... 5
Feraci, Mr. Manning, Vice President of Federal Affairs, National
Biodiesel Board................................................ 7
Litterer, Mr. Ron, Chairman, National Corn Growers Association... 9
Hurst, Mr. Brooks, Member of Board of Directors, The Paseo-Cargil
Biofuels Plant, Tarkio, MO, On behalf of the Missouri Soybean
Association.................................................... 11
APPENDIX
Prepared Statements:
Velazquez, Hon. Nydia M.......................................... 29
Graves, Hon. Sam................................................. 31
Kimpel, Mr. Nathan, President, New Energy Corp., South Bend, IN.. 33
Howe, Mr. John,Vice President of Public Affairs, Verenium
Corporation, Cambridge, MA..................................... 37
Feraci, Mr. Manning, Vice President of Federal Affairs, National
Biodiesel Board................................................ 44
Litterer, Mr. Ron, Chairman, National Corn Growers Association... 49
Hurst, Mr. Brooks, Member of Board of Directors, The Paseo-Cargil
Biofuels Plant, Tarkio, MO, On behalf of the Missouri Soybean
Association.................................................... 54
Statements for the Record:
Environmental Working Group...................................... 58
Society of Independent Gasoline Marketers of America............. 64
Patrinos, Ph.D., Mr. Aristides A.N., President, Synthetic
Genomics Inc................................................... 66
(v)
FULL COMMITTEE HEARING ON
THE STATE OF THE RENEWABLE FUELS INDUSTRY IN THE CURRENT ECONOMY
----------
Wednesday, March 4, 2009
U.S. House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 1:00 p.m., in Room
2360 Rayburn House Office Building, Hon. Nydia Velazquez
[chairman of the Committee] presiding.
Present: Representatives Velazquez, Moore, Dahlkemper,
Schrader, Kilpatrick, Clarke, Ellsworth, Sestak, Griffith,
Halvorson, Graves, Luetkemeyer, Schock and Thompson.
Chairwoman Velazquez. Good morning. I now call this hearing
of the Small Business Committee to order.
In his joint address to Congress last week, President Obama
made it clear that there can be no economic recovery without
energy independence. Entrepreneurs are already leading that
charge. Small biofuels producers are not only addressing
climate change, but are helping to end our reliance on foreign
oil. Just as importantly, they are creating new jobs and
ushering in a stronger, greener economy.
The U.S. is now home to 176 biodiesel plants, up from just
9 in 2001. Ethanol facilities are also on the rise. Thirty-one
new plants opened in the last year, with facilities spanning 26
states across the country. These businesses are generating jobs
for thousands of Americans and breathing new life into rural
economies. On top of that, they are making serious strides in
developing cleaner, sustainable oil alter natives. Last year,
production for biodiesel alone reached 690 million gallons.
But despite their recent progress and enormous potential,
many of these businesses are now struggling to survive. With
the price of oil relatively low, the country has been lulled
into a false state of complacency. The call for renewable
fuels-which once rang loud and clear-has since died down.
Meanwhile, the growing recession has also taken its toll. For
biofuels entrepreneurs, the effects have been nothing short of
devastating.
Perhaps the greatest problem plaguing the renewable fuels
industry is the diminished focus on energy prices. With oil
hovering around $40 a barrel, demand for renewable fuels has
fallen off considerably. Profits are down and, to make matters
worse, so are investments. Most of us know it is only a matter
of time before gas prices go up again. Unfortunately, many
venture capitalists now view renewable energy as a long-term
investment-one that few are willing to make in this uncertain
economy.
For the biofuels industry, dwindling investor interest has
been compounded by the recession. Credit is drying up, and
banks are not making loans. Even lending through the USDA's
Farms Service Agency-traditionally a lender of last resort-has
been jeopardized. Applications for FSA lending have shot up 200
percent since last year. The agency is now worried about
meeting demand in the coming fiscal year.
The results of these drop-offs will be dire. Already, new
construction for ethanol plants has slowed dramatically. At the
same time, more than 25 facilities have closed nationwide,
idling almost 2 billion gallons of fuel capacity. Businesses
that have managed to survive are straining to meet even basic
obligations like feedstock expenses.
Many biodiesel and ethanol providers committed to these
contracts when grain and vegetable costs were at a premium.
Though prices have plummeted, businesses are still locked in at
record rates.
Two weeks ago, President Obama signed the American Recovery
and Reinvestment Act into law. That bill includes more than $70
billion in energy measures. But while provisions within the
stimulus will encourage greater use of renewable fuels, they
will not address every challenge. That is why we are here
today-to discuss viable fixes to the problem. Already, a number
of potential solutions have been raised, from increasing the
blend wall for ethanol to extending targeted tax incentives. In
this afternoon's hearing, we will examine a few of those
suggestions.
When oil hit $147 a barrel last summer, biofuels looked
like the best way out of a full blown energy crisis. Today,
they are the best way out of a dormant energy crisis. These
businesses are not only creating new jobs, but they are working
to ensure we are not caught in the crosshairs when gas prices
go up again. That's more than energy independence-that's
economic independence, and that's the new energy plan this
country needs.
I would like to take this opportunity to thank all of
today's distinguished witnesses in advance for their testimony
and, with that, I yield to Ranking Member Graves for his
opening statement.
Mr. Graves. Thank you, Madame Chair, and I want to thank
you again for holding a fantastic hearing as far as I'm
concerned because this is an issue that affects, very much
affects, rural America as well as every citizen in America and
you've always shown a very strong interest in small businesses
both in our urban areas and in our rural areas.
Energy is the life blood of our economy. U.S. economic
prosperity is closely tied to the availability of reliable and
affordable supplies of energy. This is not a new issue.
However, with technology improving exponentially, the energy
independence discussion has changed greatly over the past few
years.
The stark reality is that we import about 60% of the
petroleum we currently need. To make our petroleum problem
worse, we have not built a new refinery in the United States in
over 30 years. It is stretching our refining capacity to the
limit and affecting the volatility of energy prices.
Efforts to open up the Arctic National Wildlife Refuge and
the Outer Continental Shelf to oil and natural gas exploration
should and must continue, but we cannot ignore the fact that we
need renewable fuels to help take the strain off of our need
for imported fossil fuel energy.
It is not just the United States that is going to need more
energy in the coming years. Our traditional energy supplies
will be increasingly strained by dramatic growth in global
demand. We need to focus on both short-term and long-term
goals. Most certainly, investing in renewable fuels technology
is a positive step toward energy independence. We must be
forward thinking in our approach to meet our current needs and
future requirements. These sources of energy could hold the key
to energy independence in the future.
Over the past few years of substantial growth in the
renewable fuels industry, many policymakers who might have had
legitimate concerns about the industry are beginning to see the
value and positive outcomes that can be associated with
renewable fuel sources. These positive results are found most
immediately in rural America where the difficulty in attracting
jobs, investments, and maintaining the infrastructure can be
more complex.
This hearing presents an excellent opportunity to learn
more about the renewable fuels industry. Many of these
producers are classified as small businesses by the Small
Business Administration. Not unlike other industries, biofuels
producers are facing difficult economic times with little
available capital necessary for expansion and job creation.
This is especially critical for small producers who do not have
the available equity to leverage loans. The volatile economic
conditions are also having a negative effect on this industry
and today we hope to detail what, specifically, are the biggest
impediments to growth, and offer policy options that could help
the industry continue to grow.
Again, Madam Chair, I appreciate you having this hearing.
It's an issue that I'm intimately familiar with and thank you.
Chairwoman Velazquez. Thank you and I welcome our first
witness, Mr. Nathan Kimpel. He's the President and Chief
Operating Officer of New Energy Corp. in South Bend, Indiana.
New Energy Corp. was the first large scaled green field ethanol
plant built in the United States. It started in 1984. It is
scheduled to produce its two billionth gallon of fuel this
year. Welcome sir. You have five minutes to present your
testimony.
STATEMENT OF NATHAN KIMPEL, PRESIDENT, CEO, NEW ENERGY
CORPORATION, SOUTH BEND, INDIANA
Mr. Kimpel. Good afternoon, Madam Chairwoman, and Ranking
Member Graves and Members of the Committee. My name is Nathan
Kimpel and as the Chairwoman said, I'm President and Chief
Operating Officer of New Energy Corp. New Energy is located in
South Bend, Indiana and became operational in 1984 and we are,
in fact, getting ready this year to produce our two billionth
gallon.
In 2008, New Energy purchased over $180 million worth of
corn from local farmers, cooperative elevators and commercial
grain companies. As you've already said, this is an important
and timely hearing and I'm pleased to be here to discuss the
unique challenges and economic difficulties currently facing
New Energy Corp. and the U.S. renewable fuels industry. Today's
renewable fuels industry consists of 170 bio-refineries located
in 26 different states with the capacity to produce 12.4
billion gallons of high octane clean-burning motor fuel. In
2008, the renewable fuels industry's operating capacity
increased by 2.7 billion gallons, a 34 percent increase.
The U.S. renewal fuels industry is a dynamic and growing
industry that is revitalizing rural America, reducing emission
in our nation's cities and lowering our dependence on imported
petroleum. Ethanol is becoming an essential component of the
U.S. motor fuels market. Today ethanol is blended in
approximately 70 percent of our nation's fuel and is sold
virtually from coast to coast and border to border. Last year
the U.S. renewable fuels industry produced and sold a record
9.2 billion gallons, contributing significantly to the nation's
economic and environmental energy security.
The U.S. ethanol industry continues to have a positive
impact on our nation's economy. U.S. ethanol producers have
long been on the cutting edge of the green economy helping
support more than 494,000 well-paying jobs in 2008 alone.
Importantly, ethanol production provides a critical stimulus
for struggling rural economies providing farmers the most
important value added market for grains in more than a
generation.
The economic crisis is significantly impacting sustained,
continued growth and development in our industry. Recently, the
U.S. renewable fuels industry have been devastated by the
scarcity of both short-term credit to finance on-going
operations much less the long-term capital to finance expansion
and new construction. The renewable fuels industry along with
all of our small business partners, the American corn farmer,
have fallen victim to many of the same problems that have
affected other industries including high raw material costs,
but in our case, collapsing oil and gasoline prices.
Ethanol prices are partly driven by gasoline prices which
are in turn driven by crude oil prices. Many input costs for
producing corn are as well driven by crude oil prices. Both
gasoline and crude oil reached record levels in 2008. Crude oil
prices skyrocketed to $147 per barrel before sinking to below
$40. According to the Energy Information Agency, gasoline use
fell an estimated 3.3 percent in 2008, the sharpest decline
since 1992 as prices hit record levels.
Oil led the 2008 commodity boom and corn prices followed.
Oil prices have fallen due in large and part to a weak demand
from a slowing world economy. Falling gasoline prices have
pulled ethanol down as well putting severe pressure on revenue.
However, gasoline and ethanol prices have fallen much more than
corn prices over the last year.
In our company, we look at a concept called The Commodity
Price Spread. This is essentially the difference between the
daily market replacement prices of ethanol and corn expressed
in a dollar per gallon basis.
In January of 2008, the Commodity Price Spread was enough
to cover all production and debt service cost plus make a
reasonable contribution to return on investment. However, by
July the Commodity Price Spread had narrowed to a point where
an average or model plant was perhaps covering all variable
cost and making a contribution to semi-variable cost but likely
not covering the fixed cost of operation much less debt
service. Since July, the Commodity Price Spread has vacillated
between not even covering variable cost to making a
contribution to fixed cost but rarely if ever making any
contribution to debt service.
Our projection for the balance of the year solely based on
futures market for corn and ethanol show little improvement.
Corn input costs are established as much as a year before cash
sales by the farmer actually takes place. Our suppliers tell us
at today's market price they are well below their production
price. Unless agriculture production costs drop substantially
this year, the price squeeze between corn and ethanol may well
continue into next crop year.
The RFS for 2009 which is effectively 9.5 billion gallons
after imports and prior year credits are taken off is now not
only the floor of demand but also the ceiling of demand. Today
more than 25 ethanol plants have closed nationwide idling
nearly two billion gallons of capacity.
The outlook for New Energy Corp. and the U.S. ethanol
industry will depend on several factors including economic
growth which is consumer spending and gasoline demand, credit
availability, oil and gasoline prices. We need to assure the
continued viability of the industry as it stands today as well
as provide for future evolution and innovation while
stimulating thousands of green jobs. To do this, access to
immediate and necessary operating capital is critically
important to help weather the current economic conditions
facing the industry.
U.S. ethanol producers have answered the challenge to put
forth in the RFS and are producing enough ethanol to fill the
requirements and I might add for both this year and next year.
Chairwoman Velazquez. Mr. Kimpel, time has expired.
Mr. Kimpel. Okay.
[The statement of Mr. Kimpel is included in the appendix at
page 33.]
Chairwoman Velazquez. So you will have an opportunity
during the question and answer period to add any comments that
you might want to make.
Mr. Kimpel. Very good. Thank you.
Chairwoman Velazquez. Our next witness is Mr. John Howe.
He's Vice President of Public Affairs for Verenium Corporation
in Cambridge, Massachusetts. Mr. Howe has held leadership roles
in several organizations including the Coalition for the
Commercial Application of Super Conductors and the National
Association of Regulatory Utility Commissioners. Verenium
Corporation is a leader in the development and
commercialization of cellulosic ethanol. Welcome sir.
STATEMENT OF JOHN HOWE, VICE-PRESIDENT, PUBLIC AFFAIRS,
VERENIUM CORPORATION, CAMBRIDGE MASSACHUSETTS
Mr. Howe. Thank you very much, Madam Chair and Ranking
Member Graves. I greatly appreciate your welcoming me here
today for a critical hearing at a critical time. I'm going to
summarize my pre-filed statement with seven fairly brief
points.
First of all, curbing our use of imported fuels is a
massive challenge, but it is imperative that we meet it because
of a convergence of three huge factors. Our country's monthly
outlays for oil imports are sapping our economic and
competitive strength. We're coming to grips with the reality
that a global peak in oil production will arrive in a
comparatively short time. And we've awaken to the fact that
uncontrolled carbon emissions have thrown our climate into a
disequilibrium that could threaten much of human civilization
in the future if we don't address it soon.
Low carbon advanced biofuels can help on all of these
fronts. This is why they've turned in a fairly short time from
being a nice-to-have option to a must have solution. Looking
beyond today's anomalous short-term collapse of oil prices, we
will need clean liquid fuels for the long haul. Once these new
sources are commercially available, it will take years to scale
them up to have a meaningful impact. We have no time to lose.
Second, advanced biofuels will be tremendous engine for
small business formation and growth. This industry by its
nature will rely on small scale, geographically diverse
production and regionally adapted feedstolks and processes.
That means that large numbers of good, non exportable jobs in
small businesses all over the country will be created as
suggested by the map in my prepared statement.
Third, there is solid technical progress to report. Just
last month my own company, Verenium, finished commissioning one
of the nation's first and indeed one of the world's largest
true demonstration scale cellulose-to-ethanol plants. It's in
southwest Louisiana. In January, we announced our first
commercial plant in Florida that will generate hundreds of good
jobs. Several competitors are likewise making good progress.
The naysayers claim that advanced biofuels are a decade
away and always will be. But it's simply not true. The
ambitious production goals in the RFS can be met if we marshal
the sense of urgency that our national situation requires. If
we stick to the commitment and don't turn back, this is truly a
case where we hold destiny in our own hands.
Fourth, we must not downplay the obstacles and challenges
facing advanced biofuels. Chief among these is financing. Even
big established companies selling mature products find it hard
to get credit in today's environment. For us, it's basically
impossible. In the best of times, private lenders won't take
technology risk on energy projects.
So we have reached a financing logjam. First of a kind,
commercial scale projects are essential to establish the track
record upon which private capital can lend in the future. There
is basically no other place to go for funding today except to
the government for the loans, grants and loan guarantees to
make such projects possible.
Fifth, there are other complex risks in making advanced
biofuels a commercial reality, the typical challenges of
developing complex technological processes. We're having to
work with the Ag sector to put together a fairly complex new
supply chains to plant produce harvest and collect new kinds of
feedstocks.
There's the off-take market. You hear a lot today about the
ten percent blend wall. Between legislation and regulation, our
industry needs to get clarity on just how the ramp-up of
biofuels to 36 billion gallons under the RFS squares with a
quota under EPA regulations that will max out at about 12
billion gallons of ethanol. Lifting the blend limit to 13 or 15
percent will help, but it will merely postpone the issue for a
couple of years. It offers no certainty at all for advanced
biofuels producers who are expected to produce the lion's share
of future new capacity.
And then let's face it. Global oil markets are not exactly
textbook Economics 101. They feature extreme volatility,
strategic behavior and outright manipulation of price and
quantity by large actors like OPEC whose agenda is to prevent
biofuels from being established as a viable alternative source.
As an American, I can think of few better reasons why we should
move aggressively to increase our use of biofuels than the fact
that OPEC wants us to think it's a bad idea.
Sixth, let's not let this long list of challenges deter us.
Let's focus on the vast potential inherent in advanced biofuels
to renew our economy, create jobs, protect our environment,
improve domestic security and global security for as these
technologies go global they will democratize the balance of
power in energy production and use around the world. That
potential is real. I've included the summary of an excellent
new report by Sandia and GM that finds that a large scale
cellulose/ethanol industry meeting about one-third to about
one-half of our liquid fuel needs is feasible and affordable
within in a surprisingly compact geographic footprint. The key
is a sustained, consistent policy commitment. A halfhearted
approach won't do.
If I may ask you for just a moment to close with a seventh
point and personal observation, our economic calamity arose
from many complex factors, but I believe the surge in world oil
prices over the last four years is what triggered the
avalanche. It drained our economy of $1 trillion of our
families' accumulated wealth. It showed us that if we don't
bring our dependency on oil imports under control, we will
remain weakened for a long time.
Given the realities of climate change and impending peak
oil, there is no path to a truly sustainable recovery for our
country that does not include commercially viable, scalable,
environmentally sustainable technologies to produce liquid
fuels from domestic feedstocks, in other words, advanced
biofuels.
The challenges in getting there are severe, but failure is
not an option. Thank you very much.
[The statement of Mr. Howe is included in the appendix at
page 37.]
Chairwoman Velazquez. Thank you, Mr. Howe.
And our next witness is Mr. Manford Feraci. He's the Vice
President of Federal First for the National Biodiesel Board.
Mr. Feraci runs the Washington, D.C. office spearheading the
organization federal regulatory efforts. The National Biodiesel
Board is national trade association representing the biodiesel
industry for research and development in the United States.
Welcome.
STATEMENT OF MANFORD FERACI, VICE PRESIDENT, FEDERAL FIRST FOR
THE NATIONAL BIODIESEL BOARD
Mr. Feraci. Madam Chair, Ranking Member Graves, Members of
the Committee, thank you for holding this important hearing
today and I appreciate having the opportunity to testify on
behalf of the National Biodiesel Board.
As you said in your opening statement, the National
Biodiesel Board is the national trade association for the U.S.
biodiesel industry and we represent everything from biodiesel
producers to feedstock providers to fuel marketers to
technology providers. So we really do represent the whole
waterfront, as you would say, of the entire industry.
Biodiesel itself is a diesel replacement fuel. It's made
typically from agricultural oils, waste greases such as yellow
grease, also more commonly known as restaurant grease, and
animal fats. It is refined to hit an ASTM D67 fuel
specification. We comply with Tier 1 and Tier 2 emission
requirements of the Clean Air Act.
In the marketplace, the fuel is typically used in five
percent blends in with conventional diesel fuel. But it can be
used to the levels up to 20 percent. It's distributed through
the mainstream existing petroleum infrastructure that we have
right now. We're in about a little over 40 distribution
terminals across the country and we're really excited that
there's two major pipeline companies so far that have actually
run biodiesel through a pipeline and we think that this holds a
lot of potential to get our fuel distributed in the mainstream
infrastructure which ultimately is in the nation's overall
policy goals.
There are significant public policy benefits associated
with the use of biodiesel, the first being let's talk about
energy security and reducing our dependence on foreign oil.
With biodiesel production what you're getting is you're getting
additional fuel production capacity and new fuel that's being
added to our overall infrastructure. The 690 million gallons
that we produced in 2008 displaced 38.1 million barrels of
petroleum. In addition, it's also worthwhile to mention that
biodiesel is an extremely efficient fuel and that you get 3.2
units of energy for every one unit of energy it takes to
produce the fuel.
We're good for the environment. We've reduced direct carbon
emissions by 78 percent compared to conventional diesel fuel.
That's the equivalent in 2008 of removing 980,000 cars from the
roadways.
We have literally no sulfur emissions and if you talk about
water use the water that was used to produce biodiesel in the
United States last year was the equivalent that was used to
maintain two large golf courses. So we are very efficient when
it comes to that.
We're creating jobs and economic opportunity in rural
America. In 2008 alone, we supported over 51,000 jobs, added
over $4.2 billion to the nation's economy, generated $866
million in tax revenue for state, local and federal government.
If we hit our potential which we estimate to be about 1.77
billion gallons of production we'll support over 78,000 jobs
and add over $6.6 billion to the overall economy.
The other thing that I always thing is worthwhile to
mention is that the existence of the U.S. biodiesel industry
right now is really the driver that is encouraging this
investment in some of the next generation feedstocks that
people have heard about, for example, algae which we think
holds great potential as a lipid source. There's a lot of
research that's going on in it right now to make that
commercial.
Right now, in the advanced biofuels component when you're
talking about biomass based diesels, we're really the only
industry out there that is at commercial scale and we are the
ones that are the ones that are the ones that are driving that
research.
All that said and all the success that we've had though is
really in danger right now because our industry is facing some
pretty severe economic hardship right now and it's a perfect
storm of factors, lack of access to capital which is not unique
to our industry, volatility in commodity markets, and lastly
we've had uncertainty relating to federal policy which signals
that the support for biodiesel going forward is tenuous at
best.
Now we're not asking for new programs. We're not asking for
huge new initiatives. What we're asking for moving forward is
the maintenance of what we have now because it's been working.
The first thing that's vital to our industry is the
biodiesel tax initiative. It achieves the goal of making our
fuel price competitive with diesel fuel in the marketplace.
It's a dollar per gallon tax incentive. So by making us price
competitive, it makes it easier for us to market our fuel and
get greater infrastructure and I think greater penetration in
the fuel stream. Unfortunately we were pleased that the tax
incentive was extended for one year through 2009, but the very
short-term duration of these extensions are really drawing into
question whether the commitment to biofuels.
The second thing to mention real quick is we need a
workable, renewable fuel standard. The 2007 Energy Bill put in
for the first time a diesel replacement. It requires the
replacement of diesel fuel in the marketplace with low carbon
fuel. We're ready to meet that requirement. Unfortunately, the
process that EPA is going through right now could have the
effect of making it nearly impossible to meet those standards
and I'd love to answer a question about that. I know my time is
almost up here, but I would love to get more into that if we
have the opportunity during questions.
Thank you very much for the time.
[The statement of Mr. Feraci is included in the appendix at
page 44.]
Chairwoman Velazquez. Thank you, Mr. Feraci.
Our next witness is Mr. Ron Litterer. He's the Chairman and
past President of the National Corn Growers Association. As a
representative of NCGA, Mr. Litterer has advocated development
of biotechnology, emphasizing the importance of responsible and
accountable management. The NCGA is a producer directorate
trade association headquartered in St. Louis that represents
the interests of more than 30,000 farmers.
STATEMENT OF RON LITTERER, CHAIRMAN, NATIONAL CORN GROWERS
ASSOCIATION
Mr. Litterer. Thank you, Madam Chair, and distinguished
Members of the Committee. Thank you for the opportunity to
testify today on behalf of the National Corn Growers
Association regarding the state of the renewal fuels industry
and the current economy.
My name is Ron Litterer. I'm a farmer from Greene, Iowa
where I grown corn and soy beans and I also have a hog
finishing operation. I appear before you today as a grower and
Chairman of the NCGA Board representing more than 32,000
growers from across the country.
For more than 20 years, NCGA has worked side by side with
farmers, industry and government to build the ethanol industry
from the ground up. Through our efforts corn growers across the
country and the ethanol industry have helped America move
closer to energy independence.
Our industry has been and is currently a major force in the
revitalization of rural American by creating green jobs and by
stimulating economic activity in our communities. However, the
corn ethanol industry along with many others is feeling
pressure from the current economic downturn in the U.S. and
world economies. It is imperative that at a time when our
country is facing a worsening economic crisis we recognize the
significant role of the existing grain-based ethanol industry
has in promoting not only energy independence but a more stable
and prosperous U.S. economy.
During these uncertain economic times, corn growers and
other Ag producers continue to face a number of serious
challenges. We along with many industries continue to face a
very volatile marketplace. Over the past three years, the price
of corn has seen dramatic fluctuation. The decrease from record
highs in 2008 have been dramatic with prices falling by more
than 48 percent over the past eight months.
Despite tough economic times, corn production is becoming
increasingly more efficient. Today biotechnology enables
farmers to apply fewer inputs to produce larger crops on the
same land. Currently, it takes about 40 percent less land to
grow a bushel of corn than in 1987 and energy use to produce a
bushel of corn has fallen by an average of 50 percent.
According to Keystone Center's Field to Market Report
released January 2009, the production of corn in the U.S. has
made significant measurable improvements and reducing energy,
water, land use, and carbon emissions. In order to maintain our
sustainability, improvements at that production level is
imperative that the corn ethanol industry continue to grown and
prosper.
There is no doubt that rural America along with the rest of
the country is undergoing a time of tremendous economic
challenge. It is for this reason we would like to highlight the
important impact that farmer-owned, homegrown fuel production
has in bringing opportunity to the main streets of rural
America.
The role of the American farmer is changing, growing to
encompass providing food, fiber, feed and fuel for our country.
With the help of the U.S. biofuels industry our nation's rural
economy is providing more opportunities for farmers through
homegrown, renewable energy development.
However, the well-being of our industry is threatened today
by the declining state of our national economy. NCGA feels
strongly that the continued economic vitality of the U.S.
renewable fuels industry is crucial for attracting the
investment in research and development of second generation,
renewable feedstocks. For that reason, it is imperative that
the existing grain-based ethanol industry and the accompanying
infrastructure that has been built around that industry
continue to prosper and remain viable in order to serve as a
bridge for the next generation of biofuels.
In conclusion, NCGA sees the grain-based ethanol industry
as a critical part of the domestic energy security. It's
inclusion as part of the nation's energy policy has
strengthened and further diversified our nation's fuel supply
in a time of global volatility and increasing demand for
energy. Finally, despite these trying times, corn growers will
continue to meet the growing demands of food, feed and fuel in
an economical and environmentally responsible manner.
I would like to thank the Committee for its time and look
forward to any questions you may have.
[The statement of Mr. Litterer is included in the appendix
at page 49.]
Chairwoman Velazquez. Thank you, Mr. Litterer.
And now I recognize a gentleman, Mr. Graves, for the
purpose of introducing our next witness.
Mr. Graves. Thank you, Madam Chair. Our next witness is and
by the way you have a very distinguished group of witnesses
today.
Our next witness is Brooks Hurst. Brooks and his family
farm in northwest Missouri, 3,000 acres and their family is
very active in biodiesel and ethanol production. Brooks himself
serves on the board of directors for the Missouri Soy Bean
Association and also on the board of directors of the Paseo-
Cargill Biofuels Plant which produces 30 million gallons of
biodiesel a year and 40 million pounds of edible food grade
glycerin.
So, Brooks, thanks for being here.
STATEMENT OF BROOKS HURST, BOARD MEMBER, MISSOURI SOY BEAN
ASSOCIATION AND PASEO-CARGILL BIOFUELS PLANT
Mr. Brooks. Thank you, Mr. Graves, and I would also like to
thank Madam Chair and Ranking Member Graves and all the other
distinguished Members of the Committee for allowing me this
opportunity to talk to you today about the biofuels industry.
As Mr. Graves stated, I'm a farmer from northwest Missouri
and I am a board member of a biodiesel production facility in
Kansas City, Missouri and then I'm also a member and investor
in a small ethanol plant in the town of Craig. So I've seen the
great benefits that it brings to the small rural communities,
close to home. The Craig ethanol facility, for instance, is
about a 20 million gallon plant. So it's a really small plant.
It has 300 farmer investors and so it's very important to the
farmers around their markets.
I also want to thank Madam Chair and Ranking Member Graves
for your opening statements, the depth and understanding that
you have of the situation that we're facing and so I will kind
of just hit a few highlights of my written testimony since you
obviously understand a lot of the problems we're facing.
One of the things that I would like to say is that we would
like to extend as Mr. Feraci pointed out the biodiesel fuels
blenders credit. One of the issues that is facing us right now
is in a volatile market which we've all heard about the
volatile markets. It really helps to be able to lock in prices.
As we go forward into the uncertainty of not knowing whether
there's going to be a blenders credit in the year 2010 it makes
it really hard in order for our facilities to lock in contracts
that we can lock in at a profit.
Another advantage I would like to point out the renewal
fuels industry is that it is small producer owned plants
scattered out across the country and one of the benefits this
gets you is a catastrophic weather event like Hurricane Katrina
doesn't affect biodiesel or ethanol production. We still go on
producing renewable fuels for our country to use.
I would also like to reiterate Mr. Feraci an issue or urge
the speedy implementation of the Renewal Fuel Standard that
Congress passed in the latest energy bill. I realize there are
a lot of details to be worked out, but I think it's very
crucial that we have a domestic impetus for demand. As everyone
is well aware right now, the EU has embargoed biofuels,
biodiesel, going into the European Union and we're working on
trade talks to get that resolved, but there were several
shiploads of biofuel sitting in the coast not being able to be
exported. So not only do we need to work that trade issue out,
but the renewal fuel standard would really help increase our
demand domestically and making that important.
I would also like to say that we have a byproduct of
biodiesel which is glycerin and Mr. Graves mentioned that we
have refining capacity in the Paseo-Cargill facility in Kansas
City, but there are a lot of biodiesel production facilities
that do not have the capability to refine glycerin. But it can
be used as a fuel. In fact, there's been tests that it's a very
effective fuel additive in No. 4 diesel and if we could
establish, get the Energy Department to establish it as a fuel
eligible for the biodiesel fuel credit I believe that would
help set a floor for one of the critical byproducts of the
biodiesel production.
And with that, I'd like to say that we as a nation stand at
a crossroads. The decisions that are made today will impact the
country for years to come. It's my hope that my testimony will
help demonstrate the importance of the biofuels industry and
your Committee will consider my recommendations. It's crucial
that we work together to ensure the U.S. biofuels industry
continues to play an important role in rural development and
growing our fuel supply.
And with that, I'd again like to thank you, Madam Chair,
Ranking Member Graves and all the other Members of the
Committee for this opportunity to testify before you today and
if you have questions, I'd be glad to answer.
[The statement of Mr. Hurst is included in the appendix at
page 54.]
Chairwoman Velazquez. Thank you. Thank you, Mr. Hurst.
I would like to address my first question if I may to Mr.
Howe. President Obama reaffirmed his commitment to renewable
fuels and energy security in his address to Congress last week
and while there is tremendous opportunity from ethanol
production from biomass we are not there yet. So can you talk
to us about given the present economic situation that we're in,
what will it take to get cellulosic ethanol to the marketplace?
Mr. Howe. Madam Chair, I believe the key step that we have
to take is to achieve some successful I would call proto-
commercial facilities. That is full commercial scale, first of
a kind. These projects have not been built at commercial scale
yet in this country. Our company has undertaken a significant
private investment of $80 million to demonstrate a
demonstration scale that's about on a log chart halfway from
pilot to commercial. That was a major commitment that we made
with our own shareholder funds.
But to get to full commercial scale which we believe is in
the range of 30-40 million gallons per year, we're talking
investments of $200-$300 million if we can achieve success. I
think we can't have a halfhearted approach. We need to decided
we're going to make a full commitment to a handful of proto-
commercial facilities, establish the track record of
reliability, identify what the problems are and then I'm
confident as the economy returns private lenders will be able
to step in and help the scale up.
Chairwoman Velazquez. With the new provisions that are in
place in the Farm Bill, how long will it take before we can
achieve full scale commercialization?
Mr. Howe. Well, as I think about the Farm Bill, I think of
three provisions that were especially important. There is a
cellulosic-ethanol producer tax credit of $1.01 per gallon,
very helpful. Unfortunately it expires in 2012 and given the
time frame that's really not going to be an effective
inducement for new capital investment. So I would recommend
that expiration date be extended for five-six years for example
to really provide an incentive to attract some new investment.
A second program that I think offers tremendous promise is
the Biomass Crop Assistance Program. This will provide an
inducement for agricultural producers, growers, landowners, who
are by and large a fairly conservative lot. They may not want
to move away from existing growing programs where they have
subsidies, insurance programs, into a brave new world where
those programs don't exist.
So we need to get the BCAP program up and moving. I know
there has been some concern about it, requests for an
environmental impact statement that could delay it. Again, I
think we need to make a commitment to do this at some
significant scale.
The third is the Loan Guarantee Program which the USDA is
putting in place and that program needs to be funded robustly
and the rules need to be looked at in order to make it feasible
for private lenders to get behind projects.
Chairwoman Velazquez. Thank you, Mr. Howe.
Mr. Kimpel, you mentioned the immediate need for financing
to cover daily operating expenses. As part of the Economic
Recovery Bill, this Committee created a stabilization program
to address those challenges and that initiative will allow
small firms to take interest-free loans, those helping the
businesses that you talk about whether the recession and pay
down existing debt. Would you agree that this kind of program
will be useful for the ethanol industry?
Mr. Kimpel. Yes. Absolutely, it would. But while we are
still considered small business, the scale of our business is
mammoth. To build a 100 million gallon ethanol plant today, if
anyone would build an ethanol plant today, is probably
someplace in the neighborhood of $200 to $250 million.
Operating cost today in our industry is probably someplace
between $300 to $400 million. So the numbers are absolutely
massive.
We also have as John had referred to here the availability
of loan guarantees. One of the interesting things about loan
guarantees at 65 or 75 or 80 percent is that you can't even get
a bank to look at you unless you have somehow a 100 percent. So
even areas that have the capacity to take advantage of loan
guarantees are going untapped simply because nobody will loan
anybody anything.
Chairwoman Velazquez. I guess that we need to talk to some
of the banks who are taking TARP money and see if they will be
willing.
Mr. Kimpel. Yes.
Chairwoman Velazquez. Since those loans are guaranteed by
65 to 70 percent in the case of USDA and up to 85-90 percent
under SBA. I guess that we need to bring the banks to talk to
us and see what else it will take.
Mr. Litterer, less than two years ago, this Committee held
a hearing on renewable fuels. At that time, we learned about
the small business boom in ethanol and biodiesel production. We
also learned about the rural rejuvenation taking place as a
result of that boom. Clearly, the picture has changed
dramatically. What will it take for small producers to overcome
these challenges and do you believe that the result build-up in
capacity was too rapid?
Mr. Litterer. First of all, I think we have to recognize
that right now the most limiting factor to small producers is
access to capital. That is an overriding issue and it's not
just this industry. It's a lot of industries in our country. So
if we could get that problem fixed, I think that would help a
lot of producers.
The other part of that is the pricing between gasoline and
ethanol. If that would change, that would dramatically change
the outcome for ethanol producers.
As far as the build-up of capacity, I don't think any of us
had a crystal ball to see what was going to happen with our
economy. There's no question we were trying to meet a demand
for phasing our MTBE. We met the challenges. We expanded. We
believe we have a product that needs to be here long term for
replacing imported crude oil and I think if we all had a
crystal ball maybe we would have done some things differently,
but looking at it at the time we think we did the right thing
and I think the industry can rebound from this if we can get
our credit situation solved.
Chairwoman Velazquez. Okay. Thank you.
Mr. Feraci, I know that your board has been supportive of
the renewal fuel standard two and we all know that they are
still in its regulatory phase and the good thing about it is
that it will recognize biodiesel fuel for the first time. In
the context of the recession, what will be the proper
implementation of RFS 2? What will that mean for your industry?
Mr. Feraci. Thanks for the question. The Renewal Fuel
Standard, proper implementation of this, to have a program that
is going to be workable, is absolutely vital to our industry.
It really could be a make or break for us right now and given
the way things are out in the economy and the way the market
conditions are.
RFS 2 the thing about it that was--From our industry's
perspective, it was so groundbreaking. For the first time you
have a renewal requirement in U.S. diesel fuel that you didn't
have before and it's a component of the advanced biofuel
schedule and you ramp up from 500 million gallons in 2009 to
one billion gallons in 2012 and one of the requirements of that
fuel is that fuel to qualify for that component of the program
it has to reduce greenhouse gas emission by 50 percent.
Now we have well-founded data that's over a decade old and
has been refined consistently that shows when you look at
direct emissions associated with biodiesel you get a 78 percent
reduction.
What our concern is right now is that the entire advanced
biofuel schedule, the first component of it to roll out which
is this biomass based diesel component, could be in jeopardy if
the EPA doesn't implement this in a correct way. What we're
concerned about is that due to some of the additions that
they're throwing in with the calculation of greenhouse gas
emissions you could have the effect of essentially
disqualifying all vegetable oil from being used as a feedstock
to meet what is the very first component of the biomass based
diesel schedule and if you do that just quite frankly you
simply don't have the feedstock to meet the program and the
first component of the advanced biofuel schedule that rolls out
is a failure. So it's imperative to us that this be done
correctly.
Chairwoman Velazquez. Do you have an ideas as to when EPA
will implement it?
Mr. Feraci. By statute, they were supposed to have a final
rule in place by January 1 of this year. Now they clearly
haven't done that. Based on conversations, we assume that we're
going to see the NOPR here maybe within the next couple weeks
and we certainly want to see that process move forward because
getting a program up and running and that's workable is
absolutely vital to us. But it has to be done in a correct way.
Chairwoman Velazquez. Thank you.
Mr. Graves.
Mr. Graves. Thank you, Madam Chair.
I want to kind of-I guess for everyone's interest-point out
that the nice thing about biofuels whether it's ethanol or
biodiesel, they're products that work and we have them right
now. These are products that have to be further developed.
These aren't products that have to be dreamed up or come up
with. These are products that work right now and every gallon
of biodiesel or ethanol that we use is a gallon of petroleum we
don't have to find somewhere else.
Ethanol can be produced from anything. It can be produced
from corn. It can be produced from sugar. It can be produced
from cellulose, anything that ferments. If it ferments, you can
make ethanol out of it. And biodiesel is vegetable oil. That's
what it is which kind of brings me to the environmental impact
of biofuels.
If you crack open a shipload of petroleum in the ocean some
place you have a major environmental problem. If you crack open
a shipload of ethanol, it's completely water soluble because
it's alcohol or vegetable oil. You have a much, much different
issue on your hands. That's the reason these products are so
good.
But we have an industry that is struggling and we have a
lot of small plants out there. The vast majority of them as of
recently we've had private investment in them, but for the most
part they're farmer owned cooperatives. It's just a bunch of
farmers getting together to raise capital and now they're
caught up in the credit crunch because there's not a lot of
credit available out there.
So now I've made my soapbox pitch. But I do want to ask
about the blenders wall that we have out there because right
now it's ten percent of an ethanol blend and in our farm I know
we run about 30 percent ethanol blend. What we do is go out and
buy E85 which is an 85 percent blend. We bring it back. We
blend it out in our own fuel tanks and get about a 30 percent
blend which my mother uses in her car all the way to the trucks
on the farm that we use. Biodiesel we've used as much as a 50
percent blend in our tractors with no horse power loss
whatsoever. So you can go much, much higher without any
modifications to the system.
But my question is how much impact is it going to have if
we can make that jump to say 15 percent and I just think, Mr.
Litterer, you may have mentioned it or somebody mentioned it
but the question is actually for all of you. How much impact is
that going to make when it comes to demand and helping out if
we make the jump, say, to 15 percent ethanol blend and why
can't do that? What is the reason for the 10 percent wall that
we have?
The same thing in biodiesel. If we set the bar higher.
There is no reason why we shouldn't be able to do that. And
again every gallon of biofuels that we use is a gallon of
petroleum we don't have to find and I would rather be dependent
on U.S. farmers than I would Saudi Arabia for our fuel any day.
My question is what can we do and how big a challenge is that
going to be to move that blenders wall up the scale for all
those products and I'll start with you, Mr. Kimpel.
Mr. Kimpel. Mr. Graves, we need to take you along on our
next visit to see the automobile companies.
There are obviously regulatory issues, but one of the
issues that has been brought up to us every time that we talk
to the automobile companies is exactly what you have talked
about and that's the warranty issues and perhaps there are some
legitimate issues there.
But it is critical, absolutely critical, that we solve the
blend wall and perhaps we're going to do it in steps. Perhaps
it's going to be 12 percent and then 15 percent and then 20
percent and whatever it takes to get us to the 35 to 36 billion
gallons that we so desperately need to solve these issues that
we've been talking about here today.
But there are a number of initiatives that are going on as
we speak. We have our partners in the industry, the Ag
community, the Department of Energy, Environmental Protection
Agency, USDA, all are actively involved in this. But taking
that first leap and getting off the arbitrary limit that was
established years ago at ten percent is critical.
Several years ago, we had 140 billion gallons of spark
ignition motor fuel in the United States. Ten percent of that
if you get 100 percent market penetration doesn't even get us
to where we need to be at the end of the conventional renewal
standard much less get into the cellulosic and advanced
biofuels. It is critical and it's critical also in the sense
that we don't have to rail the stuff to every single corner of
the country.
Mr. Graves. Mr. Howe.
Mr. Howe. Thank you very much, Mr. Graves.
I'll pick up where Mr. Kimpel was just speaking about. We
absolutely should go forward. We should push this limit as far
as the science will justify. I know there have been concerns
expressed by auto manufacturers about warranty on legacy
vehicles, small engine manufacturers, boat operators and so
forth. Those considerations need to be taken into account, but
I'm not sure that they should dominate the issue. If there's a
way that we can provide fuel that is a higher fraction of
gasoline for the lawnmowers and weedwackers of the country most
of the auto fleet will be able to use richer blends I think
over time or can be designed to use richer blends.
But ultimately down the road we can get a few more
percentage points that will accommodate growth in grain ethanol
in the next five, six, seven years. The RFS schedule calls for
much higher use which is to be from cellulosic sources. So I
believe that that fix does not really address the long-term
challenge that we face.
As I see it, there are only two other options. One is a
complete change of chemistry to other kinds of molecules such
as biobutanol, the problem being that the chemists have not
determined that we can produced biobutanol that has as
favorable an energy balance or a carbon balance as ethanol
does. And the other alternative is E85. If we can make the kind
of commitment to E85 that Brazil has made to all ethanol
vehicles we can have essentially limitless growth or dramatic
growth in the use of biofuels in the future of this country.
I see this as an issue of standards. This is Windows and
Mac. You can't say that Mac is inferior to Windows. In fact, a
lot of people think it's a better operating system. But the
problem is one of compatibility. So we need to look at how we
can accommodate this new fuel for the future rather than
necessarily adjust to the legacy fuel.
Mr. Graves. Mr. Feraci.
Mr. Feraci. From the biodiesel perspective, the issue is a
little bit different because they're different fuels and
different spaces in the economy. But overall as an industry our
overall goal is to try to get five percent displacement in the
overall U.S. diesel pool and from the macro sense the first
real tangible step we can take is get the RFS 2 implemented in
a successful way.
But as an industry and this has been going on for some time
we work pretty closely with engine manufacturers to try to get
these higher level blends that you're talking approved for
engine warranties. Right now, B5, everyone warranties B5 now
and as a matter of fact we went through the process as an
industry at ASTM to have a change in the D975 diesel fuel spec
which is just conventional diesel fuel that if you have spec
biodiesel up to B5 blend that's blended in with conventional
diesel fuel it's just deemed to be D975. It's not some other
sort of designation. So if you pair that with pipelines and
other sorts of fuel infrastructure that's going to give you a
significant amount of penetration into the fuel infrastructure.
But getting up to B20, some manufacturers warranty. Some
don't. We're constantly working with them to try to get them to
do it because like you we agree. We think you can do it and
have no detrimental impact on engines at all.
Mr. Graves. Mr. Litterer.
Mr. Litterer. I am not going to repeat what our first
participants have said, but just to add to, I think that we
have to address this very shortly and EPA is going to be key in
this because that's where the science is going to be researched
and they need to prove it. It's going to take maybe up to two
years to get it implemented once the decision is made. So it's
something that we need to work on immediately. It's one that if
we're ever going to go to second stage ethanol production, the
cellulosics, we have to get this issue resolved.
Mr. Graves. Mr. Hurst.
Mr. Hurst. Thank you, Mr. Graves.
I also wanted to state the Underwriters Laboratory came out
two weeks ago and basically said that they, which is an
independent third party verification, could see no problem with
12, 15 percent blend in any of the pipelines, in any of the
infrastructure we have currently in introducing a 15 percent
blend. So I thought that was important factor.
And I also wanted to touch a little bit on biodiesel. One
of the attributes of biodiesel is since we have eliminated
sulfur, even a two percent blend increased the lubricity for
your engine. So actually biodiesel, if you put a little bit of
biodiesel, it's better than petroleum diesel right now for the
lubricity.
Mr. Graves. Thank you, Madam Chair.
Chairwoman Velazquez. Thank you.
I would just like to ask you a question. What will be the
maximum amount and you are suggesting to increase it from 10 to
12, 15, that will make it compatible with today's cars and
infrastructure?
Mr. Howe. We need to defer to testing to determine that
number. I don't--We don't have expertise.
Chairwoman Velazquez. Okay. Mr. Sestak.
Mr. Graves. It's 30 percent on our farm. We know that.
Mr. Sestak. Thanks, Madam Chairwoman.
Could I ask you, sir? Go back to RFS. What do you see as
the purpose of RFS? Its policy purpose?
Mr. Feraci. I would say it's multi-faceted. From our
perspective, you obviously get the energy security goal of
displacing petroleum with renewable fuel. In our case, that
would be biodiesel and increasing the amounts that you're
getting on that side as well. Another stated goal of it is to
have not only you're displacing petroleum but you're addressing
the whole issue of climate change as well.
Mr. Sestak. With that in mind, with what you said in your
concerns, are you all right with a life cycle cost approach of
it? I mean, was that what your problem was with the life cycle
cost or is it the discount rate that they're trying to use?
Mr. Feraci. It relates more to the whole idea of indirect
land use changes and here's what our specific concern is.
Mr. Sestak. In short, you don't do soybeans. Somebody else
is going to soybeans and you have to take that cost in.
Mr. Feraci. Yes, the idea that U.S. agricultural in
particular has been pretty stable and it's extremely
sustainable. It's somehow attributed with having deforestation
in South America for example.
Mr. Sestak. But if the goal as you said is climate,
shouldn't we take that into account?
Mr. Feraci. We should take it.
Mr. Sestak. Up until now, ethanol has by and large not been
performance-based criteria. The more you build the more subsidy
you get. I was taken with RFS because it's the first time we've
have a performance-based criteria. But part of that
performance-based criteria is climate change.
Mr. Feraci. Right.
Mr. Sestak. So why not take an indirect land use?
Mr. Feraci. We don't have an issues with taking into
consideration indirect. By statute, you have to. In the RFS, it
says that you have to account for significant indirect land use
changes.
Mr. Sestak. But your problem is that-
Mr. Feraci. Our issue relates to the science of it. Right
now, we know how to measure direct emissions.
Mr. Sestak. Right.
Mr. Feraci. We have a great model that's been out there for
10 years now and that model has been refined over time to show
a pretty definitive result across the board. The science of
indirect land use change is so inexact right now that you could
really put some false attributes on some fuels that aren't
accurate. As a matter of fact, the Europeans in their
renewables directive took a close look at this issue and they
decided just to push it down the road in terms of having to do
the indirect land use change calculations.
We have no problems with that because we think at the end
of the day that you're going to have a positive attribute and
we're not going to have a negative impact on it. But what we do
have an issue with is a science that's very undefined,
unreliable and inexact at this moment attributing something
negative to a biofuel that's really not there.
Mr. Sestak. We had looked at the RFS. It's not a cap in
trade. It's more of a floor in trade. But my question I guess
then is what did you think about the discount rate and trying
to trade off bad action today for bad action in the future.
Mr. Feraci. We're not sure. I mean we haven't seen the rule
yet in terms of what we're talking. They had a stakeholder
briefing, EPA, with various groups. We haven't seen what
they're going to do on the discount rate. By statute you're
going to have to be compared to, our fuel is going to be
compared to, 2005 emissions associated with diesel fuel and
we're going to have to just play in the statute.
Mr. Sestak. I agree that-Yes sir.
Mr. Litterer. Could I just add a comment about the land use
issue?
Mr. Sestak. She's real tough on my time. No, go ahead.
Mr. Litterer. That's all right.
Mr. Sestak. I'm only kidding.
Mr. Litterer. Just simply that in corn production our
production is not static and it never has been. If you go back
historically, we've about a two percent growth rate in corn
production per acre per year. So in other words we can meet the
growing demand for corn without adding a lot of additional
acres and that is a key that I think a lot of fundamental of
this research that is being left out of the picture and the
equation that needs to be really considered. In fact, if you
look at the tech providers in producing seed corn today, they
say that we're even going to accelerate the rate of that growth
because of the technology going into seed. So that goes to the
science and the accuracy of the formulas they use in land use.
Mr. Sestak. That's a good point. The reason I asked is I've
always kind of felt that as valuable as ethanol and
particularly now as we get into advanced fuels are that the
lack of having a performance-based criteria although it helped
economically it was about you billed more, you get more. It
wasn't about does one of your plants use coal or natural gas. I
mean there's a difference and you get the same tax subsidies
for both. I'm not sure we-So that's why I was taken with RFS.
But I understand it's the science of the ones that you have,
not the concept.
Chairwoman Velazquez. Time expired.
Mr. Sestak. Thank you.
Chairwoman Velazquez. Mr. Luetkemeyer.
Mr. Luetkemeyer. Thank you, Madam Chairwoman.
I just have one quick question for Mr. Howe. You made a
comment awhile ago with regards to you had some suggestions
with regards to SBA lending that you think would be able to
help facilitate some of the loans to some of the plants. Could
you elaborate on it just a little bit?
Mr. Howe. I did mention the USDA loan guarantee program.
The concern I was alluding to is there are restrictions in the
terms of that program that limit the rate at which a lender for
the balance of the non guaranteed portion that limits the rate
that the lender can charge and also, of course, that balance is
unguaranteed. The results of those conditions in the rule is we
have found, and we've extensively tested the market, that
there's very little appetite to participate in this program
right now, certainly under today's conditions. So we believe
there either needs to be a guarantee of a higher fraction or
100 percent of the loan and some relaxation on the conditions
on what the lender can charge for the balance of the loan.
Because right now, it's a program that it's like we're 200 feet
offshore and we're getting thrown a 100 foot rope. It's just
not going to do the job.
Mr. Luetkemeyer. Okay. So what you're saying is if the
lender had the ability to have a higher rate of guarantee or
could receive a higher rate of guarantee he would more inclined
to lend. Is that what you're saying?
Mr. Howe. That would help. However, I think it's the fact,
the notion, of having to bear risk for projects for which
there's not a technology track record. That itself is
problematic. This is why our community has been saying that for
the first projects of a kind the highest possible fraction of
guaranteed loan is essential.
We're only talking a handful of projects here so that we
can establish that track record and then get off to the races.
Private lenders have financed tremendous expansion of proven
technologies like independent power, wind power, solar
installations. But we have to get that fire started. We've got
to do the first few projects. I think it's a good public
investment for the government to get behind these first
projects.
Mr. Luetkemeyer. Okay. Which first projects are you
referring to? Are you referring to cellulosic or are you
referring to some other technology?
Mr. Howe. This program is for biorefineries, advanced fuel
biorefineries. So I think we are talking certainly about
cellulosic, ethanol and other technologies that qualify under
the RFS, in other words, that achieve significantly higher
carbon reductions. So that's certainly our interest in it.
Mr. Luetkemeyer. Very good. Thank you, sir.
Thank you, Madam Chairwoman. I'm give you back my time.
Chairwoman Velazquez. Mr. Griffith.
Mr. Griffith. Thank you, Madam Chair. I am taken number one
by the technology and the information and the expertise of the
panel and thank you for being here.
As a business man, there's something wrong here when we are
not attracting private capital. Cargill, the largest privately
owned company in the world should be a source of capital. Exxon
should be a source of capital. Microsoft and many, many others
and hedge funds and venture capital funds that look for
opportunities that they see with great potential in the future
and would love to invest in. Why do you think they are
reluctant to invest in this area of energy production?
Mr. Howe. I believe we are confronting a problem of public
good. This is a classic public good problem that warrants
government intervention. If we look at the benefit that the
ethanol program has created for the country here was an
excellent analysis done by Merrill Lynch about eight or nine
months ago showing that the mere presence of the nine or ten
billion gallons of ethanol in the nation's fuel mix helped to
keep fuel prices, gasoline prices, about 15 percent lower than
they would otherwise have been last year when we had that
shocking episode of nearly $150 oil. What DOE has found is the
American consumers saved $20 to $40 billion which I think is a
tremendous payback on the $5 billion or whatever that was paid
to the oil companies as subsidy for using ethanol.
This is one of these instances. It's a tragedy of the
commons problem where the benefit cannot be captured by the
private investor. There is a critical need for the government
to participate to facilitate these new technologies.
Mr. Griffith. If the CAFE standards were raised to 47 to 50
miles per gallon per average for a manufacturer, would you have
a viable industry?
Mr. Howe. I think we need to do everything we can looking
out into the future. This is not either or. This is a both and
situation. We need to conserve. We need to become efficient. We
need to electrify. We need to do everything, you know,
reconfigure our communities. But at the end of the day there
will be a significant residual demand for liquid fuel that
today is provided by petroleum that in the future needs to be
provided by cleaner fuels as our petroleum supplies play out
and as we come to grips with the necessity to reduce carbon
emissions.
Mr. Griffith. And if we have a two year drought that
reduces the baseline product, what would we be looking at as
far as our industry is concerned if we became dependent for 20
percent of our fuel on biofuel or biodiesel?
Mr. Litterer. You know, we haven't had a major drought in
this country since-
Mr. Griffith. Last year.
Mr. Litterer. No, we really haven't. If you go back in
history, we have not really had a major drought affecting crop
production. We've had isolated regional droughts. But we have
not had a major drought that has impacted production. We had
problems a couple years ago but we have still produced in the
last two years 13 billion and 12 billion respectively, the two
highest corn production years in history and, sure, there are
going to be some ups and downs.
But to say we're going to have two years back to back major
drought, if you look back historically, that just has not
happened.
Mr. Griffith. I see.
Mr. Litterer. It hasn't.
Mr. Griffith. I guess my question to you is what are the
objections of private capital investing in this. I see such
great potential for it and I'm sure there are people a lot
smarter than I am that you're pitching this to in the private
markets and they're not coming forward.
Mr. Feraci. If you-there are a variety of things right now.
I'm speaking from biodiesel perspective. There are a variety of
things right now that are causing harm to the industry and
making it difficult to attract that capital. The one thing that
we-some of that we can control. Some of that we can't. I mean
the one that would be helpful is that you have to have this
stable policy framework that is reliable, that sends a signal
that biofuels are not just a flash in the pan, that it's
something that's going to be there for a while to draw this
sort of investment in the terminal infrastructure and things
like that that you really need to get infrastructure.
Mr. Griffith. That makes perfect sense. Thank you all.
Chairwoman Velazquez. Time has expired.
Mr. Schock.
Mr. Schock. Thank you, Madam Chairwoman. First, let me say
I agree with the comments that have just been made and that is
that we have to provide some level of consistency to the
biofuel markets so that investors will want to continue to
invest. Lenders, banks, financial institutions, venture capital
firms will feel safe about making an investment in these plants
and we as policymakers I think need to do what we can to shore
up the market so that there is some consistency for those that
are doing what it is we've asked them to do which is provide an
alternative fuel for our country.
Specifically, I'm concerned with our ethanol industry right
now as they have taken a hit and I think it's extremely
important not only for that industry but every other industry
thereafter whether it be cellulosic or others that we hope to
have that industry be successful not only for the jobs that
they've created but also for the psychological benefit that it
has as we mentioned with the investors and entrepreneurs
wanting to invest in the next greatest, latest invention, if
you will, when it comes to biofuels.
With that said, I'm pleased that in my area, a group called
Biofuels Manufacturers of Illinois, BMI, is in the process of
starting a biodiesel plant right in my district. Currently,
they've obtained all the necessary permitting, the land rights
and are ready to build the plant. They actually have contracted
already with an enduser for their products. So it's not pie in
the sky, trust us if we build it, if we produce it, someone
will buy it. But actually the Farmer Cooperative GrowMart has
agreed to buy their biofuel once it is produced.
I'm equally pleased that unlike some of the others that
have come and gone in terms of the new biofuels they have
partnered with the USDA lab in Peoria. Peoria, Illinois is home
to one of four USDA Agricultural Utilization Centers and the
researchers there have discovered a new crop which is currently
termed a weed, pennycress, which has 36 percent oil in it,
nearly twice as much of soybean, which is very exciting.
Equally exciting I think is the fact that it's a winter crop
which means it can be grown right now when the land is dormant
and not being used, thus adding a second shift if you will to
crop production into the agriculture industry.
With all that being, they've had their hurdles if you will
in getting that plant online and getting this idea to be not
just an idea or a dream but actual reality and I'm just
interested in hearing from Mr. Feraci what your organization
specifically with biodiesels can do for a group of
entrepreneurs and individuals who have gone a long way in terms
of the work and the investment to help make that a reality.
Mr. Feraci. Congressman, I know you've expressed a lot of
interest in that project and we applaud your leadership on
that. The National Biodiesel Board, we're a feedstock-neutral
organization and the sort of research that you're talking about
where they're looking at pennycrest as a potential oil seed
crop is something that we're excited about. We encourage that
going on.
And as you look at the industry has it has grown to
commercial scale, with each passing year, you're seeing
increased diversity in the feedstock that we're using to
produce fuel. Yes, soybean oil is still a very important
feedstock to us, but you're seeing more restaurant grease and
animal fat and now you're seeing things like camelina and
pennycrest that are coming on list as viable feedstocks that
you can use to produce a spec biodiesel that will be accepted
in the marketplace. So we're extremely excited about that.
Our organization with some of the things that you're, among
some of the these that these enterprising individuals are
probably going to run into is eventually at some point they're
going to run into an issue with crop insurance and our
organization does outreach with that to help them so that they
get covered underneath that program.
There is also going to be a grower outreach component to it
as well because like you said they're rotating and I believe
those will be acres competing with winter wheat. So again we do
grower outreach. We talk about the benefits of it and there is
clearly going to be a demand for this feedstock out there if
the price is competitive and going forward we would be more
than happy to work with you to make this project a success.
Mr. Schock. Great. Thank you. What kind of help do you
provide in helping? I know the other issue, of course, is our
loan guarantees.
Mr. Feraci. Right. In terms of just pointing them, we'd be
more than happy to visit with them, see exactly what they're
doing, what their needs are and see if we can't point them in
the right direction in terms of programs they should be
applying for.
Mr. Schock. Okay. Great. Thank you.
Chairwoman Velazquez. Ms. Halvorson.
Ms. Halvorson. Thank you, Madam Chairman, and thank you,
panel.
It's great to see you and this is an issue that's near and
dear to my heart. First of all, let me tell you I drive a
flexfuel vehicle. I buy E85 everywhere I go because I believe
if each and every one of us takes responsibility for ourselves
and talk about it that's a big help because we need to buy
American wherever we go and we should be doing this not only
when gas is $4 a gallon, but even when it's lower.
I just want to tell a story. I'm sure that everybody has a
story to tell and you hear many of them. But I have a company
in my district called Nova Biosource Fuels. It's in Seneca,
Illinois and it's a renewable fuels business that's having
financial trouble due to the economic crisis that we're in and
it's probably no different than anybody else and it's a
producer of biodiesel. It buys leftover grease from the fast
food restaurants and turns that waste product into useable
energy.
Now I toured it a couple of weeks ago and now last Thursday
they have announced that they will be ceasing production
because they're unable to identify a lender to give them credit
while they're waiting for money to come in. They need to buy
their feedstock so that they can turn it around. They have the
capacity to annually produce 230 million gallons of biodiesel
which is equal to 55 million fewer barrels of crude oil if only
they had the funds to be available to them. When oil is valued
at $40 a barrel, it means over $2 trillion of U.S. wealth
transfers out of this country.
Now this is probably no different than anybody else and
I've heard for the last hour and a half some of the different
challenges and what's going on. We've heard about loan
guarantees. We've heard about different challenges. They need
$20 million. Now that's not something that's easily gotten and
they've talked to several creditors.
Now as a panel and whoever wants to answer this, if there
was one thing you as a group would ask Congress, how would you
ask Congress right now to help with this credit crisis because
that is the problem? Simple, one thing and I shouldn't use the
word ``simple.'' Nothing is simple when it comes to Congress,
but everybody's having trouble getting credit and it's a
vicious cycle and this is our problem. If they can get credit,
they could keep their employees or their people employed and go
out and get their product. What would you say to Congress on
what you would need to get help for to keep these businesses
going?
Mr. Feraci. I'll take a stab at it.
Ms. Halvorson. Thank you, Mr. Feraci.
Mr. Feraci. You know, Nova Biosources are one of our
members. They produce a quality fuel. They're a great company.
I mean you've really put a face on what is a larger issue in
our overall industry right. I know I'm sounding like a broken
record here, but I would go back to you're talking about
drawing in capital and having people have faith that there's
going to be a long-term commitment to displacing petroleum with
domestic renewable fuels.
So I would give you two answers and you've heard me say
them previously. You have to have a long-term extension of the
tax incentive and you have to have a workable RFS 2 that's
going to create a domestic market for these fuels. That sends a
signal to creditors and investors that these industries are
going to be around, these companies are going to be around, and
there's going to be a marketplace for them to meet a demand in.
I think that would go further than anything in terms of keeping
companies like Nova Biosource around and we should.
Ms. Halvorson. And how soon could we do that? I mean how
quickly then could we help them stay in business, turn things
around, so that they could do what they do best and that we
could send the message and educate people out there that we're
going to do everything we can here in Congress to help them
because what we've done in the stimulus package is to help
those who haven't gotten to this point. You know they're
already up and running. They don't need that feed money or that
seed money to get started.
Mr. Feraci. If you look at the stimulus bill and there are
some parallels to be drawn from it the idea of doing multi-year
extensions on Section 45 on the renewable energy electricity
production side is going to have the effect that you're talking
about. The idea was that you're going to draw that capital in.
The sooner that you can move on a longer term extension of
biodiesel the better off we're going to be. The same thing on
the renewable fuel side.
I mean Congress has acted. The program was supposed to be
up and running on January 1 of this year. The sooner that's
implemented in a workable fashion the better off that they're
going to be.
Ms. Halvorson. Great. Thank you so much.
Chairwoman Velazquez. Time expired.
Ms. Halvorson. I guess we have to go vote. Thank you so
much.
Chairwoman Velazquez. Mr. Schrader.
Mr. Schrader. Thank you, Madam Chair. We're competing with
votes I guess here pretty shortly. I come from Oregon and very
interested in the woody biomass. We're experimenting with other
alternative, canola and other more convenient, if you will,
alternatives to corn and biofuels. But I'm interested in the
woody biomass, in particular, in the advance. So while a lot of
the questions I know some of the answers will be similar. But
how in particular can we help or what are the first steps for
making woody biomass? And by that I mean particularly the
forest woody mass. Over 50 percent of my state is Federal
forest and I would like to use that to advantage.
Mr. Howe. If I may take a crack at that, Mr. Schrader.
With the stroke of the pen, Congress could alter the
definition of eligible woody biomass which as you'll recall in
the Energy Independence and Security Act something like 24
percent of the available biomass was ruled ineligible for
conversion to cellulosic biofuel and I think we have come to
recognize that that needs to be changed in order to open up the
kinds of feedstocks that you're talking about.
We see tremendous potential for the conversion of woody
biomass, the pulp and paper mills, residues. We can make our
remaining paper industry and lumber industry more viable
enabling them to produce co-products. So I would say that is
probably the most important thing you could do. I think the
technology would come along to meet that need fairly quickly.
Mr. Schrader. Very good. Brazil has been very successful in
promoting ethanol and biodiesel production. What have they done
that's so different? Why is their circumstance, I'm not talking
about the current economic crisis we're facing, but what's been
their approach and why have they gone that route and we have
not?
Mr. Litterer. Well, I think they, of course, got started
much sooner than we have. They've also made their automobiles
so they can all use ethanol. I mean they've made that decision
a long time ago. They can burn all levels of ethanol. They have
capability with their automotive fleet and that's probably the
biggest difference.
Mr. Schrader. I go a different route than some of the other
members here. I also have some small independent gasoline
dealers in my district and there's a lot of concern and there
was a point at which they had trouble getting ethanol this past
winter. Some of the larger brand name oil companies are frankly
hoarding it to make sure that their stations had opportunity.
So how do I juxtapose that against the discussion there's
plenty of ethanol out there in this crisis and stuff? How do we
make sure the independents are guaranteed access to ethanol at
five, ten, fifteen, pick a number, blend?
Mr. Howe. Over time, we need to develop the infrastructure.
We need to disabuse ourselves of the falsehood that ethanol
can't be moved by pipeline. It can. It is. It's just that we're
not doing it yet. In fact, it has started in Florida, pipeline
infrastructure development. We need to maintain a good rail
network obviously. But I think what we're talking about is not
a shortage of production capacity. It really is distribution
bottlenecks that have created those problems.
Mr. Schrader. Okay. That's probably the area. The last
quick question and I don't know if you can answer it. What's
the price point for oil or barrel of oil or gallon of gas where
it becomes optimum for investment in biofuel/biodiesel
technology?
Mr. Litterer. I'm not sure there's one price point that you
can point to because you have crude oil, you have corn price,
you have all these input that go into it. So I don't know that
you could come up with one price.
Mr. Schrader. What's the range? I guess I'll refine.
Mr. Litterer. Body, I don't know. I think if we were at
today's corn price probably and a $60 to $70 oil, we probably
could be pretty competitive. But I really hesitate to throw too
many numbers around here because it's a moving target.
Mr. Howe. I think one important idea to throw in here is
the long-term replacement cost for oil is probably in the range
of $70. When prices went below $70, we saw oil companies,
state-owned oil companies, and private developers worldwide
start to pull back on development. So we are no longer
replacing the oil that we are using up.
Remember last year when oil was $80-$100 and rising and
there was polling of American consumers. Would you be willing
to live with an oil price that doesn't go below $70 if that
provides the assurance for a renewable fuels industry to take
root and develop, a lot of the Americans at that time would
have been very happy to say, ``I'll sign up for $70 if I know
that's my hedge.'' Now that oil went down to $36 to $40, where
is that commitment? That's what we need.
Mr. Schrader. Thank you.
Chairwoman Velazquez. Ms. Dahlkemper.
Ms. Dahlkemper. Thank you, Madam Chairwoman. I thank you
for bringing forward to us this timely and critical meeting. I
think there are few of us who are not concerned about our
dependence on foreign oil and know the implications certainly
on our domestic economy and our foreign policy.
In my district, we have Lake Erie Biofuels and, Mr. Feraci,
I guess I wanted to address you on a couple questions here,
having sat down and talked to them a number of times about
what's going on in that industry and Pennsylvania, I'm from
Pennsylvania, and I think we're the fourth state I believe now
that is going to be working towards a two percent blend. Is
that correct? Four states?
Mr. Feraci. Yes, you're definitely towards the front end.
Ms. Dahlkemper. Yes. So obviously we're a long way. We have
46 other states out there.
But I guess my question is, first of all, I wanted to ask
how many plants have closed recently because my understanding
is there's a number of biodiesel that have closed or are very
close to closing at this point.
Mr. Feraci. Right. As well as we can-I mean the last survey
of our members that we did there is 176 plants out there right
now. Again, doing these surveys, we estimate that about one-
third, maybe even less, are actually operating and producing
fuel right now.
Ms. Dahlkemper. The others were all producing fuel at some
point.
Mr. Feraci. At some point, yes. It's still in the ground.
They're operating biodiesel plants. They're just not running
right now.
Ms. Dahlkemper. And these are all over the country.
Mr. Feraci. These are all over the country, yes.
Ms. Dahlkemper. Okay. So my question is I guess because
Lake Erie Biofuels, 80 percent of their production goes to
Europe. Right now, they're in just kind of temporary issue with
Europe stockpiling thinking they were going to go to a ten
percent blend I believe, but they're still at 5.75 because of
the economy. But they would like to sell domestically.
Is the issue more of a blend requirement issue, you know,
having a customer base here within our country or a capital
issue in terms of why two-thirds of these plants have closed
down?
Mr. Feraci. We kind of tern it a ``perfect storm'' of a
confluence of events that have come together that are all to
the detriment of the industry, be it you have an unfavorable
feedstock pricing versus the price of petroleum. You mentioned
Europe. That's the world's premium diesel market that the
Europeans are taking protection steps in our opinion to close
that market down.
But long term what we want to do and what we think is
important and what was envisioned in the RFS2 is to create a
domestic marketplace and a domestic draw to get fuel used in
here in the U.S. so that Lake Erie Biofuel can sell their fuel
here and that's what the RFS2 is all about.
We're behind schedule on implementation of that. It has to
be implemented in a workable way so that they're going to have
a demand, a built-in demand, in this marketplace to replace
petroleum diesel fuel with their product.
Ms. Dahlkemper. So I guess that goes back to Mr. Griffith's
question regarding investment and this all needs to come
together to make this happen.
Mr. Feraci. Absolutely and the one, a stable policy
framework, something that's reliable that the private sector
knows is going to be there for the long term is what you need
to draw in this investment capital and provide the certainty
that these guys need. If you look around the world where
they've had successful implementation of renewables policy,
Europe, we talked about Brazil. The one commonality is that
they made a commitment and it was a long-term commitment and it
was reliable and people knew that it was going to be there and
we need to have the same thing here.
Ms. Dahlkemper. Okay. Thank you very much. Appreciate it. I
yield back my time, Madam Chair.
Chairwoman Velazquez. Thank you. Let me just thank all the
witnesses for your incredible contribution in the discussion of
this important issue and, Mr. Feraci, regarding EPA and RFS2,
I'm going to be looking into that issue and we're going to see
as a committee what can we do to make sure that it is done and
it is done properly without jeopardizing any of the industries.
With that, I ask unanimous consent that Members will have
five days to submit a statement on supporting materials without
objections. So ordered.
This hearing is now adjourned. Thank you. Off the record.
[Whereupon the Committee adjourned.]
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