[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]




 
                        SUBCOMMITTEE HEARING ON
                   IMPACTS OF OUTSTANDING REGULATORY
                   POLICY ON SMALL BIOFUELS PRODUCERS
                           AND FAMILY FARMERS

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

                                HEARING

                               before the


                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                              May 20, 2009

                               __________

                               [GRAPHIC] [TIFF OMITTED] TONGRESS.#13
                               

            Small Business Committee Document Number 111-025
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 SUBCOMMITTEE

               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

                                 (iii)

  
?



                            C O N T E N T S

                               __________

                           OPENING STATEMENTS

                                                                   Page

Dahlkemper, Hon. Kathy...........................................     1
Westmoreland, Hon. Lynn..........................................     2

                               WITNESSES

Cook, Ms. Cheryl, Deputy Under Secretary of Rural Development, 
  U.S. Department of Agriculture.................................     3
Oge, Ms. Margo, Director, Office of Transportation and Air 
  Quality, U.S. Environmental Protection Agency..................     5
Noble, Mr. Mike, President, Lake Erie Biofuels, LLC, Erie, PA....    18
Wootton, Mr. Ben, President, Keystone Biofuels, Inc., 
  Shiremanstown, PA..............................................    20
Bafalis, Mr. Gregory, President & CEO, Green Earth Fuels, LLC, 
  Houston, TX....................................................    22
Gaesser, Mr. Ray, Executive Committee Member, American Soybean 
  Association, Corning, IA.......................................    24
Duvall, Mr. Zippy, President, Georgia Farm Bureau Federation, 
  Greene County, GA..............................................    25
Das, Dr. K. C., Associate Professor, Director, Biorefining and 
  Carbon Cycling Program, Driftmier Engineering Center, 
  University of Georgia, Athens, GA..............................    27

                                APPENDIX


Prepared Statements:
Dahlkemper, Hon. Kathy...........................................    36
Cook, Ms. Cheryl, Deputy Under Secretary of Rural Development, 
  U.S. Department of Agriculture.................................    38
Oge, Ms. Margo, Director, Office of Transportation and Air 
  Quality, U.S. Environmental Protection Agency..................    47
Noble, Mr. Mike, President, Lake Erie Biofuels, LLC, Erie, PA....    54
Wootton, Mr. Ben, President, Keystone Biofuels, Inc., 
  Shiremanstown, PA..............................................    61
Bafalis, Mr. Gregory, President & CEO, Green Earth Fuels, LLC, 
  Houston, TX....................................................    64
Gaesser, Mr. Ray, Executive Committee Member, American Soybean 
  Association, Corning, IA.......................................    69
Duvall, Mr. Zippy, President, Georgia Farm Bureau Federation, 
  Greene County, GA..............................................    75
Das, Dr. K. C., Associate Professor, Director, Biorefining and 
  Carbon Cycling Program, Driftmier Engineering Center, 
  University of Georgia, Athens, GA..............................    79

Statements for the Record:
Addendum to the Record, U.S. Environmental Protection Agency.....    85

                                  (v)

  


                            SUBCOMMITTEE ON
                       REGULATIONS AND HEALTHCARE
                   HEARING ON IMPACTS OF OUTSTANDING
                  REGULATORY POLICY ON SMALL BIOFUELS
                      PRODUCERSAND FAMILY FARMERS

                              ----------                              


                         Thursday, May 21, 2009

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:00 a.m., in Room 
2360 Rayburn House Office Building, Hon. Kathy Dahlkemper 
[chairwoman of the Subcommittee] presiding.
    Present: Representatives Dahlkemper, Ellsworth, Griffith, 
King, Westmoreland and Schock.
    Chairwoman Dahlkemper. I now call this hearing to order. 
Thank you for joining us. Good morning.
    As we move towards creating an environmentally sustainable 
future, we must ensure that the renewable fuels industry 
remains an important part of that future. Growth within this 
sector has been explosive. The biofuels industry, which is 
largely comprised of small firms and family farmers, is a 
multi-billion dollar business. It sustains tens of thousands of 
high-wage jobs and is giving new life to rural economies.
    Just as importantly, it's paving the way for clean, 
sustainable energy. Last year alone, production for biodiesel 
reached 690 million gallons. In recent months, however, the 
industry has faced a number of challenges that threatened to 
weaken it considerably in the long term.
    In today's hearing, we are going to examine these setbacks 
and discuss ways to ensure that this important industry is not 
irreversibly damaged. Biofuels producers are already struggling 
with falling demand, as one third of biodiesel fuel remains 
idle. With the price of oil hovering around $60 a barrel, the 
enthusiasm for alternative energy has dampened. As a result, 
many investors already skittish about the economy are backing 
away. With investment down and credit tightening, biofuel 
businesses are losing access to operating capital at a very 
critical moment in this young industry's history.
    In a February hearing, this Committee examined those 
obstacles. Today, we will look at the draft regulations with 
the EPA that have the potential to pose difficult challenges 
for the biodiesel industry. According to the Energy 
Independence and Security Act of 2007, all biofuels much 
achieve a 20 percent reduction in lifecycle greenhouse gas 
emissions, while advancing biofuels must have a 50 percent 
reduction. Lifecycle emissions include direct and indirect 
land-use charges. Measuring these charges is complex, and there 
is no consensus over how to calculate these charges. As a 
result, measurement is driven largely by assumptions and 
perhaps by some speculation as well.
    Another potential problem with this law is that the EPA 
Administrator is only allowed to reduce the lifecycle 
greenhouse gas emissions standard by 10 percent, even if the 
current target is found not to be commercially viable. 
Moreover, if a specific feedstock or agriculture practice is 
found to produce too much greenhouse gas, it could be 
permanently prohibited by the EPA. This might endanger 
industries that rely on this type of feedstock or practice.
    Fortunately, the EPA has the ability to be flexible in 
drafting emissions profiles, and it is critical that the Agency 
use that flexibility. To begin, it could accomplish a great 
deal by drafting a clear, workable framework for small firms to 
follow. As part of that process, biodiesel entrepreneurs should 
be consulted.
    In moving forward, it's important that the EPA accounts for 
the needs of small firms and family farmers who are on the 
front lines offering solutions that work for our environment 
and our economy. We need to be sure that those leading the way 
in both investing and innovating are not unduly burdened.
    I would like to take this opportunity to thank all of 
today's witnesses for their testimony. I am pleased that they 
could be here today, and I look forward to hearing from them.
    I would now like to recognize the Ranking Member, Mr. 
Westmoreland for his opening statement.
    Mr. Westmoreland. Thank you, Madam Chairman. Good morning, 
and I appreciate everyone taking the time to be here today as 
we review the impacts of regulatory policies on the biofuels 
and farming industries. Today's topic is one of critical 
importance for our nation. As we all know, energy is the 
lifeblood of our economy.
    Economic prosperity in the United States is closely tied to 
the availability of reliable and affordable supplies of energy. 
This is not a new issue. The way we discuss it, however, has 
changed greatly. For example, agriculture remains Georgia's 
number one industry and it has been the backbone of Georgia' 
economy since its founding. Just like everybody who represents 
a rural area here in Congress, small family farms dot the 
landscape of my District back home.
    Too often, we do not think of farmers as small business 
people when, in fact, they were and continue to be America's 
first small business.
    Over the past few years, we have debated renewable energy 
policies. Ethanol and biodiesel have received quite a bit of 
attention, both here in Congress and across the nation. I do 
not believe that the search for new energy sources should not 
be a zero-sum game where we foster one industry to the 
detriment of another. Our economy is driven by energy and we 
must take a balanced approach to exploring ways to meet our 
energy needs. That means looking for ways to increase 
production of everything we need including oil, coal, and 
nuclear capabilities in addition to these renewable fuels.
    While looking to the future of energy independence, we have 
to make certain the Federal Government in doing all it can to 
provide the fuel for our current economy needs to grow. There's 
continuing interest in expanding the U.S. biofuels industry as 
a strategy for promoting energy security and achieving 
environmental goals. However, increased biofuel production may 
have placed desired policy objectives in conflict with one 
another.
    There are limits to the amount of biofuels that can be 
produced from current feed stocks and questions about the net 
energy and environmental benefits that they might provide. 
Furthermore, rapid expansion of biofuel production may have the 
unintended and undesirable consequences for agricultural 
commodity costs, possible energy use, and environmental 
degradation. We must continue to be mindful of these as we 
further develop energy policy in this country.
    Another problem we face is the possibility, or in my mind 
the unfortunate certainty, of over-regulation of these 
industries and the impact it will have on the biofuel refining 
plants and the farmers who supply them. On May 5, 2009, the 
Environmental Protection Agency published a proposed rule 
implementing portions of the renewable fuel standard contained 
in the Energy Independence and Security Act of 2007. Both 
agriculture and biofuels industries have stated that this 
regulation is not only burdensome, but may be based on faulty 
science.
    Today, we are looking forward to hearing from these 
industries and these agencies about this and other regulations 
that may threaten the advancement of renewable fuels as well as 
the agricultural community.
    I want to thank Chairwoman Dahlkemper for having this 
hearing. It's of great importance and especially since the fact 
that we're right in the discussion of an energy policy that's 
going to come before this body very shortly.
    Chairwoman Dahlkemper. Thank you, Mr. Westmoreland.
    I would like to move now to the testimony from our 
witnesses. Witnesses will have five minutes to deliver their 
prepared statements. The timer begins when the green light is 
illuminated. When one minute of time remains, the light will 
turn yellow. The red light will come on when the time is up.
    I would like to introduce our first witness on the first 
panel. Ms. Cheryl Cook is the Deputy Under Secretary for Rural 
Development for the United States Department of Agriculture. In 
this position, Ms. Cook manages policies and programs in rural 
development. The United States Department of Agriculture 
provides leadership on food, agriculture, and natural 
resources, rural development, and related issues.
    Welcome, Ms. Cook.

                    STATEMENT OF CHERYL COOK

    Ms. Cook. Thank you, Madam Chair, and good morning to you 
and to other Members of the Subcommittee. It's my great 
privilege to be here today.
    In the interest of time, I'd like to submit my full 
statement for the record and just summarize my remarks now.
    USDA Rural Development is the lending arm of the U.S. 
Department of Agriculture. We have since the 2002 Farm Bill 
been actively involved in providing capital to the renewable 
fuels and renewable energy industries. We believe that biofuels 
hold great potential for reducing greenhouse gas emissions and 
improving the nation's energy security and national security.
    For rural America, renewable energy and biofuels mean more 
job opportunities, more market opportunities for our farmers, 
and opportunities for local ownership of business, creation of 
new wealth and sustainable economic development.
    Promoting clean, sustainable domestically-produced advanced 
biofuels is a high priority for the President and for USDA and 
for me, coming from the great state of Penn's Woods. The U.S. 
is already a world leader in biofuels production, having gone 
from 1.6 billion gallons of ethanol at the beginning of the 
decade to over 2 billion gallons. Similarly with biodiesel, our 
production is increasing at a tremendous rate. Of course, 
access to capital is key to making sure that increase in 
production can continue.
    I'd like to acknowledge the vision, dedication, and hard 
work of many people outside of government who took the chance 
to get started in these industries in the private sector, as 
well as those in government who have worked to make all of this 
possible. It's been a long-standing effort, sustained on a 
bipartisan basis over many years and at all levels of 
government.
    This is my eighth week at the U.S. Department of 
Agriculture which in many respects makes me an old timer at 
USDA. I come here after six years in the Pennsylvania 
Department of Agriculture as the Deputy Secretary for Marketing 
and Economic Development. Much of my time was spent convincing 
our traditional economic development partners in State 
Government that agriculture is, in fact, a business and should 
have access to the traditional economic development capital, 
such as in Pennsylvania's case, the Industrial Development 
Authority funds, the Economic Development Financing Authority 
funds, and certainly the Pennsylvania Energy Development 
Authority which was reinstituted several years ago after being 
in a closet for a few years.
    But Pennsylvania, I think, has been a leader, as have some 
other states. More than half the states now have some sort of 
biofuels incentive. Under our mandate from Congress dating all 
the way to 1980, it's incumbent on USDA and Rural Development 
in particular to ensure there's some coordination between what 
the Federal Government is doing and what State Government is 
doing in advancing biofuels and renewable energy.
    We received a new urgency when Congress gave us a whole new 
set of tools in the most recent Farm Bill last year. We went 
from what had been just the 9006 program in the 2002 Farm Bill 
to now a whole range of programs beginning with the Section 
9003 biorefinery assistance program, where we've made our first 
loan, an $80 million loan guarantee, actually to Range Fuels in 
Georgia where they are, as we speak, pouring concrete and 
getting the pad ready to build a pine tree-based biorefinery.
    We have a second project for another $25 million loan 
guarantee in the works. We see people coming through the door. 
Capital from the private sector is difficult, as you discussed 
and we see ourselves playing a role there. By being able to 
provide a loan guarantee, we reduce risks to the lender and 
make those loans possible.
    Section 9004 of the Farm Bill provides payments to 
biorefineries to replace fossil fuels that they might have been 
using for power, with biofuel or other bioresources, will be 
out soon, as will be Section 9005, which is a bioenergy program 
for advanced biofuels, getting to the cellulosic potential that 
we've been told for the last five years would be realized 
within five years.
    Section 9005 and 9004 will be the subject of notices of 
funds availability coming out within the next few weeks as we 
prepare formal regulatory process for the out years. We'll do 
this first year through a Notice of Funds Availability.
    9007, the Rural Energy for America Program, or REAP, is the 
new and improved version of what you've dome to know as 9006 
from the last Farm Bill. We already have out on the street the 
most interesting part, I think, of that new program which is 
the energy audit capacity. We're offering grant opportunities 
for third parties to do energy audits which is something 
farmers need as well as other types of small businesses. The 
rest of that program, which is a loan guarantee program as 
well, will be out within the next week or two, again through a 
notice of funds availability and competitive loan guarantees.
    We are rolling out with a new sense of urgency. We have a 
Secretary of Agriculture for whom biofuels and renewable energy 
are a very high priority. The President weighed in on May 5th 
with a directive instructing us to get going already and get 
those things out on the streets. So we are peddling as fast as 
we can and we will make those opportunities available.
    I just want to share my personal excitement, having been a 
part of the announcement back in Pennsylvania in January when 
we reached the point of 40 million gallons of production and we 
were able to assure the Governor that we could trigger our 
(b)(2) requirement and begin our renewable fuels program in 
Pennsylvania. I look forward to working with my colleagues at 
EPA and with this Committee, to make all of this potential 
real.
    Thank you.
    [The prepared statement of Ms. Cook is included in the 
appendix.]

    Chairwoman Dahlkemper. Thank you, Ms. Cook, and welcome. 
It's always nice to have another Pennsylvanian here.
    Ms. Cook. We are taking over.
    Chairwoman Dahlkemper. That's right. Slowly but onward. 
Thank you very much.
    Our next witness, Ms. Margo Oge, is the Director of the 
Office of Transportation Air Quality in the United States 
Environmental Protection Agency. Ms. Oge has been with EPA 
since 1980 and is responsible for regulating all emissions 
within the U.S. The Environmental Protection Agency works for a 
cleaner, healthier environment for the United States. Welcome.

                     STATEMENT OF MARGO OGE

    Ms. Oge. Thank you, Madam Chairwoman, and Members of the 
Subcommittee. I appreciate the opportunity to testify today. As 
you know, Madam Chairwoman, you mentioned in your opening 
remarks, recently EPA developed a proposed rule for Renewal 
Fuel Standard and the proposal has been published at least on 
our website and we're looking forward for public comments.
    We believe that this proposed rule as required by EISA, is 
a critical step towards achieving energy independence, creating 
jobs in the United States, reducing greenhouse gas emissions 
that cause global climate change and it requires really a 
significant increase of renewable fuels in the marketplace to 
replace fossil fuels. The total volume of renewable fuel must 
reach 36 billion gallons by 2022. We estimate that the 
potential climate and energy security benefits of this program 
will be significant. We estimate that these greater volumes of 
biofuels will reduce greenhouse gas emissions by 150 to 160 
million CO2 equivalent tons on an annual basis. This is really 
equivalent of taking 24 to 26 million cars off the road on an 
annual basis. Clearly, this program will have significant 
benefits for the farming community. We estimate that the net 
U.S. farm income will increase about $7 billion.
    Now we are sensitive to the potential impacts that 
regulations, like this one, can have on small business and 
recognize that many biodiesel production facilities are indeed 
small business. We have heard from many of the small facilities 
in the renewable fuel industry and I believe we have provided 
as much flexibility as it is possible under the statute to 
address the concerns in our proposal. Later, in this testimony 
I will describe at least one key provision of the proposal 
which we believe could be important to small business in the 
biodiesel industry.
    But first I want to briefly describe the key component of 
the RFS2 program which is the lifecycle greenhouse gas impact 
assessment of renewable fuels. Through EISA, Congress 
established the first mandatory lifecycle greenhouse gas 
reduction thresholds for renewable fuels. The law requires that 
each category of renewable fuels must perform better when it 
comes to the greenhouse gas emissions of the fuel, then the 
fossil fuel that it replaces, in this case gasoline and diesel.
    To implement these thresholds requires for EPA to look 
broadly at the lifecycle analysis and to develop a methodology 
that accounts for all factors that may significantly influence 
this assessment. We recognize the potential implications of 
this work. I believe we have worked with all the experts, the 
academia, the industry, the public sector, to address the best 
science available today in order to put this lifecycle 
methodology together and also we believe that this methodology 
meets our statutory obligations under EISA.
    Also, we believe that the proposal is the beginning of a 
very important dialogue and we recognize that these 
uncertainties that we have laid out in the proposal are 
important and we're soliciting peer review comments from the 
scientific community, but also comments from the public at 
large.
    Now in regards to implications of lifecycle greenhouse gas 
reduction requirements for biodiesel facilities and other small 
renewable fuel producers, it is important to note that EISA 
grandfathers renewable fuels produced from facilities that were 
either in production or under construction prior to the 
enactment of EISA in 2007. So in reality what this really means 
is that approximately 110 U.S. biodiesel facilities with a 
production capacity of about 1 billion gallons will qualify 
towards the 15 billion gallons threshold for the non-advanced 
biofuels that the statute requires.
    Let me briefly mention one of the crucial flexibilities 
that we believe would be key for the biodiesel sector. Under 
this provision in our regulation, we propose to allow the use 
of multiple feedstocks during the year such as soybeans and 
waste grease, to use the average greenhouse gas reduction 
profile from both those feedstocks, so that the project could 
qualify for biomass diesel standard.
    We're also proposing to lower the threshold for advanced 
biodiesel to 40 percent from 50 percent. We believe that 
allowing these two flexibilities would allow the biodiesel 
industry to meet the 1 billion gallons of mandate in 2012.
    Now in closing, I believe that we have put forward a 
proposal that is responsive to congressional intent for the 
renewable fuel program. The proposed rule offers a very 
important opportunity for EPA to present the work that was done 
and to have an open and transparent public dialogue with all 
stakeholders including the biodiesel sector of farmers and 
other stakeholders in the industry.
    Again, I appreciate the opportunity to testify here in your 
Subcommittee today and I'm looking forward to any questions 
that you have today or any questions that you may submit to us 
for a written response. Thank you.
    [The prepared statement of Ms. Oge is included in the 
appendix.]

    Chairwoman Dahlkemper. Thank you, Ms. Oge.
    Ms. Oge. And I'm sorry about my voice. I do have a very bad 
cold which I usually don't get. But it's not swine flu.
    Chairwoman Dahlkemper. We're so glad to hear that. H1N1 as 
we like to call it.
    I now recognize myself for five minutes. Ms. Oge, indirect 
land use and its definition have generated a great deal of 
concern for the biodiesel industry. In the Notice of Proposed 
Rulemaking, the EPA seems to treat indirect land use and 
international indirect land use equally. In the Energy 
Independence and Security Act of '07, was it explicitly stated 
that they are indeed the same?
    Ms. Oge. That's a very important question, Chairwoman. 
Clearly, the statute requires us to look at all steps from 
planting the feedstock, all the way to the time that the 
consumer uses this fuel. And in doing that the statute is 
specific in requiring both direct and indirect significant 
impacts including land use. So there's absolutely no question 
to EPA's legal office that we must evaluate both direct and 
indirect significant land use, domestically and 
internationally.
    Chairwoman Dahlkemper. What was your basis for including 
the international indirect land use in the greenhouse gas 
calculations?
    Ms. Oge. The basis is that if you look at the profile of a 
lifecycle of renewable fuel, let's say biodiesel, the most 
significant impact of this lifecycle is the land use and the 
most significant impact of the land use is the international 
land use. It's 70 to 80 percent of the lifecycle impact. So not 
including it you will have two problems. One, you would not be 
consistent with the statutory requirements of EISA and second, 
you would have scientifically a less accurate greenhouse gas 
profile for renewable fuels because you would be excluding the 
most significant impact.
    Chairwoman Dahlkemper. Seventy percent of the impact is 
international?
    Ms. Oge. For biodiesel, it's about 70 percent, yes.
    Chairwoman Dahlkemper. I guess the question is the indirect 
costs as we're looking at oil-based fuels and are we really 
looking at this in the same light?
    Ms. Oge. We have used the same boundaries in looking at the 
baseline which was the 2005 baseline for gasoline and diesel 
fuel as required in the statute in the same boundaries for 
looking on the lifecycle analysis of renewable fuels. So we're 
using the same boundaries. For example, when we look at 
petroleum fuel to estimate the baseline, we're not including 
the energy that it took to produce the trucks that move the 
fuel from diesel or gasoline fuel from extraction to the port 
to be shipped to the United States.
    The same thing with biofuels. We're not looking at the 
energy that it took to build the tractors. But what we do for 
petroleum, for example, we did take a look at the energy that 
it took to extract petroleum from Nigeria and Saudi Arabia and 
the energy that it took for the major lifecycle components to 
bring it to the United States. So we believe that we have used 
the same boundaries and the same approach, evaluating the 
baseline of diesel and gasoline and then comparing it to the 
renewable fuels.
    Chairwoman Dahlkemper. And so if their trucks are coming 
from Canada, for example, it's coming from the sand.
    Ms. Oge. Yes.
    Chairwoman Dahlkemper. Are you using that as part of--
    Ms. Oge. Again, we're looking at the 2005, the baseline for 
what percent the baseline included in the entire set, and if 
it's part of that baseline, then it will be included. But 
again, we're looking at the 2005 baseline for petroleum as 
required by statute. And then we're looking at the 2022 profile 
for fossil fuel emissions from renewable fuels which allows us 
actually improve the lifecycle profile of renewable fuels for a 
number of reasons.
    First of all, we are assuming based on USDA's input that 
the yield of biofuels will be much more significant of 
feedstocks such as soy or corn in 2022 than it is today. So you 
will require less land. Second, we have incorporate 
improvements in the production facility of these renewable 
fuels in 2022 which again reduces the energy and improves the 
lifecycle. So that's basically how we have done the analysis 
that has been extensively laid out in our proposal. And again, 
we're seeking the public dialogue and public comments.
    Chairwoman Dahlkemper. Thank you. My time is almost up, but 
I wanted to ask Ms. Cook a question.
    On May 5th, President Obama announced plans for an inter-
agency biofuels working group. This group will require the 
USDA, the DOE, and the EPA to work closely together on biofuels 
issues. Do you think collaboration between these three agencies 
will result in a final rule that the biofuels industry can 
embrace?
    Ms. Cook.This is speculation, of course, but yes, the 
President directed the Secretaries of Energy, Agriculture and 
the Administrator of EPA to jointly co-chair this new inter-
agency working group. Clearly, it's his intent that his 
Administration speak with one voice and get to a common 
position, so I know we're going to work hard on that. We're 
still putting the working group together. The three principals 
will be the people who are on the working group. So we're 
trying to coordinate schedules and get that put together.
    Chairwoman Dahlkemper. What role do you see this working 
group playing in the future of the biofuels debate?
    Ms. Cook. As much a coordinating role as anything. Even 
within USDA, Secretary Vilsack has reissued his Energy 
Coordinating Council, just trying to make sure all of the hands 
in USDA that have a piece of renewable energy are rowing in the 
same direction. The same is true across agencies between Ag and 
Energy and certainly with EPA.
    Chairwoman Dahlkemper. Okay, thank you. I now would like to 
recognize the Ranking Member, Mr. Westmoreland. I'll give you 
the extra time that I took. Thank you.
    Mr. Westmoreland. Thank you, Madam Chairman. Ms. Oge, 
nearly all the witnesses on the second panel would disagree 
with your statement, your written testimony that the indirect 
land use methodology is scientifically supported. How would you 
respond to that?
    Ms. Oge. Well, as we have laid forward in our proposal for 
the purpose of public comments, I believe that we have used the 
best science and the best tools, modeling tools that are 
available to EPA today. We have received input and support from 
Ms. Cook's office, so the inputs that we're using, the models 
that we use, they were in consultation with the USDA experts 
and the Department of Energy experts. We have talked to the 
academic institutions that are experts in this area.
    So I strongly believe that we used the best science 
available today and we have done it in a very open and 
transparent forum. For example, when we started putting those 
approaches and models together, we met with industry. We told 
them what we were doing.
    When we received the results, you know, it takes a long 
time for those models to be producing results, we sat down 
first with USDA and the Department of Energy and we shared 
those findings. And then we shared them with the industry. So 
we have done it in two ways. One, we have used the best science 
available. Second, we have done it in a very transparent way 
that we hope now to lay out all the assumptions and inputs for 
comments.
    But let me make it very clear that when it comes to 
lifecycle, there are certain elements that are very certain. 
Science is very certain. For example, we have a lot of 
certainty if you use coal or natural gas, what is your carbon 
increases from that facility in producing this renewable fuel. 
When it comes to domestic impacts, land use, we have more 
certainty. When it comes to international land use, there are 
uncertainties. So we recognize that. And we have done a number 
of sensitivity analyses in our proposal to show the impact of 
those uncertainties.
    So what we're seeking during the comment period is to have 
a public dialogue, but also take all these pieces together, all 
the models and have an extensive peer review process that will 
then inform the Administrator and the President and the other 
agencies how to proceed.
    I believe we have used the best science available.
    Mr. Westmoreland. Has this just been a rush to do this or 
is it to wait on proven methodology, rather than just trying to 
forge ahead with the best available science? So you're saying 
that this is not just best available science, that there are 
some certainties. Now these uncertainties, how does that play 
into the overall methodology that you're using to come up with 
these rules?
    Ms. Oge. First of all, I don't believe that we have rushed 
to decision. I believe we have taken the appropriate time 
required to draft these regulations. Just to give you an 
example--
    Mr. Westmoreland. How long has that been?
    Ms. Oge. It has been over a year and a half. Typically, it 
takes a year to do a proposal. Actually, EISA required that EPA 
finalize, propose and finalize this standard end of 2007. So we 
sat down with our political bosses at the time and we said we 
cannot do that. We cannot. This is too big and too important. 
So please be assured that we have taken the appropriate time 
because we realize the impacts that this will have to the 
sector as a whole, especially the first generation of biofuels.
    Second, in the proposal, we have analyzed the uncertainty 
and we have done sensitivity analysis and we believe that 
during the comment period we will have sufficient input that 
will allow us to narrow the uncertainties so we can come up 
with values that will be more defensible.
    Mr. Westmoreland. Thank you. Ms. Cook, what part did the 
USDA and I know you've been there a very short period of time, 
so you may not know this for a fact, but do you know what kind 
of active you played or the USDA played with the EPA in coming 
up with this renewable fuel standard rule because I would think 
that it would be very important for the USDA to play a big part 
in how they came up with this on renewable fuels?
    Ms. Cook. Agreed, and while I know we were involved, I'm 
afraid it predates me as you suggested. I'd be happy to supply 
that for the record. Most of that consultation would have been 
with the more science-based parts of USDA as opposed to Rural 
Development, the lending arm. But I'm sure our Research, 
Education and Extension folks, certainly the Office of the 
Chief Economist would have been involved in that and I'll be 
happy to supply that for you.
    Mr. Westmoreland. If you could supply that, I think that 
would be very interesting for us to find out what kind of 
information EPA wanted from you.
    And also, just one quick question for Ms. Cook also. The 
Commodity Credit Corporation part of the Farm Bill, can you 
expand a little bit on the progress that the USDA is making in 
regard to that?
    Ms. Cook. Are you referring to the Section 9011 Biomass 
Crop Assistance?
    Mr. Westmoreland. I have no idea. I have no idea what I'm 
referring to. Well, let me say this. I think I know what I'm 
referring to. I just don't know what part of the bill that is.
    Ms. Cook. Okay, fair enough. Our sister agency, the Farm 
Service Agency has the lead in the BCAP, the Biomass Crop 
Assistance Program. They are in the environmental review 
process now and peddling as fast as they can and I'm afraid I 
don't have specifics on dates, but I'd be happy to supply that 
as well.
    Mr. Westmoreland. If you do that, it will be fine, thank 
you.
    Ms. Cook. Sure.
    Mr. Westmoreland. I yield back.
    Chairwoman Dahlkemper. I recognize Mr. Ellsworth from 
Indiana.
    Mr. Ellsworth. Thank you, Madam Chair. Thank you both for 
being here. It's obvious we're getting a lot of feedback on 
direct versus indirect.
    Ms. Cook, in your short tenure and maybe you'll have to get 
to me, is it your understanding that the indirect is the 
scientific community is backing the opinion of Ms. Oge or the 
Environmental Protection Agency, in your short tenure are you 
hearing the same thing, or can you get back to me on that?
    Ms. Cook. In my short tenure, what I've learned is we will 
finance anything that walks through the door.
    Mr. Ellsworth. Sounds like Congress. I hope that changes. 
If you can check into that and back that up and/or dispute 
that. I would appreciate that.
    Like I said, I'd be curious because Ms. Oge, with all due 
respect, what we're hearing is that the indirect is not 
scientific, that the scientific community is not behind the 
indirect. So I think we need to get to the bottom of that.
    Ms. Oge, can you elaborate for me, it's my understanding 
with the information I've been given that there is a 
discrepancy or a difference on EPA's direct emissions lifecycle 
that now they're saying it's approximately 50 percent reduction 
in greenhouse gas emissions for ethanol than previously 
believed and can you elaborate on the reasons why this 
reduction is now greater than previous EPA estimates?
    Ms. Oge. You would have to give me a little more 
information about the 50 percent. I don't have the memory of 50 
percent reduction. But let me assume what the question is. So 
if you look at the lifecycle you look at all the factors and 
steps from the feedstock, producing the feedstock, all the way 
to the time that you and I are using it in our cars and we're 
burning it. And you look just at domestic impacts, both direct 
and indirect, because there are indirect also, land-use impacts 
when you look at domestic steps.
    Then you probably would end up for about 50 percent 
greenhouse gas reductions of corn, ethanol-based fuel in 
relationship to the gasoline fuel that it replaces. Now when 
you add the international, both direct and indirect land use, 
especially the indirect land use, then that 50 percent is 
reduced significantly. And the reason for that is because the 
indirect land use is the biggest element of the lifecycle 
analysis that has the highest greenhouse gas impacts.
    Mr. Ellsworth. Thank you. Madam Chair, I don't have any 
questions at this time as we'll go around a couple of times. I 
yield back.
    Chairwoman Dahlkemper. Yes, we're going to do another round 
of questions. I was looking over your testimony, Ms. Oge, and 
you are holding a two-day public workshop focused specifically 
on lifecycle analysis during the comment period. If you're so 
sure about the indirect land use, I'm questioning the need for 
having this two-day workshop. Could you explain that?
    Ms. Oge. Madam Chairwoman, let me make it very clear. We 
have put forward the proposal that reflects the best input in 
science that we have in developing the proposal. The purpose of 
comment period is required by statute is to get public input. 
So the public and the experts, the industry and general public 
can have the opportunity to review the total record. For 
example, on lifecycle analysis, there are thousands and 
thousands of pages of modeling and input. So we would be very 
arrogant to assume that we know everything, because if we knew 
everything we would not go out with a proposal. We would have a 
final decision.
    So I want to make this very clear, my confidence is based 
on the work that we have done putting the proposal together. 
I'm not suggesting by any means that we will not refine the 
proposal based on the public input. So we're doing three things 
during comment period. One is we're holding a general public 
hearing on June 9th, not just on lifecycle because there are 
many, many elements on this renewable fuel standard. Lifecycle 
is crucial, but there are many other elements anywhere from the 
biomass definition, crops definition, how we have done the 
analysis, the inputs and so forth. So that's a whole day of 
public hearing. Everybody is invited and we're looking forward 
to that hearing.
    Then we're holding two days of specific meetings with 
experts in the area of lifecycle and the importance of this is 
the experts in lifecycle. They will have all the inputs that we 
could not have published before proposal. And that will be very 
crucial for us. And what you need to know is we have a very 
open mind because we want to have a transparent process and 
adopt the best science.
    Third what we are doing now that the proposal is published 
we will take all the elements of the lifecycle analysis, the 
FAPRI model, the GREET model and the satellite data and we're 
going to lay it out for peer review. So there will be three 
components of public input before the Agency finalizes this 
rule.
    Chairwoman Dahlkemper. Thank you. We need to have the 
correct science and we certainly need to have transparency 
going forward. Thank you for clarifying that the EPA, and the 
DOE, and the USDA can do to continue to work to ensure that 
biodiesel remains a viable fuel?
    Ms. Oge. Maybe Ms. Cook will help answer. But let me say 
that we are very excited with the opportunity to implement the 
renewable fuel standard, RFS2, the 36 billion gallons. It's 
equivalent of replacing by 2022 close to 12 percent, 14 percent 
of fossil fuel in 2022 time frame. The environmental benefits, 
energy security benefits, and ag benefits are huge. So our 
first and most important job right now at EPA, the 
Environmental Protection Agency, is to make sure that we have 
science right, we have the policy right, that this program is 
implemented the way that Congress had intended us to implement 
it.
    Chairwoman Dahlkemper. Ms. Cook, do you have anything you 
would like to add to that?
    Ms. Cook. Sure. At this point, I think it's still a 
minority of states that have implemented fleet purchase 
requirements, I think that's certainly something Congress has 
begun in the Farm Bill, as far as federal procurement goes, but 
certainly, public dollars will be spent on fuel anyway. We 
should be doing what we can to support this industry.
    In addition, from a rural development standpoint what we're 
looking at is the rest of the distribution network and the 
infrastructure that needs to be there to actually get pumps 
available. People will buy the stuff if it's readily available 
at a pump. Getting it there can be a challenge. We have a lot 
of--even in Pennsylvania, a lot of filling stations that just 
aren't equipped to handle this stuff now, so that's kind of our 
next challenge with some of our other business development 
programs is to put the rest of the infrastructure out there.
    Chairwoman Dahlkemper. Thank you. I now recognize Mr. 
Westmoreland.
    Mr. Westmoreland. Thank you, ma'am. Ms. Oge, I know that 
you're the Director of the Office of Transportation and Air 
Quality Office and Air Radiation. How long have you been at the 
EPA?
    Ms. Oge. I have been with EPA I think 29 years.
    Mr. Westmoreland. Twenty-nine years?
    Ms. Oge. And 15 years in charge of this office.
    Mr. Westmoreland. And how long in charge of the office?
    Ms. Oge. Fifteen years.
    Mr. Westmoreland. Fifteen years. Wow. And when these rules 
were put forth on May 5th of 2009, I'm assuming that you were 
in this rulemaking process when all the scientific data was 
looked at and you concurred that this is what should be done. 
Is that correct?
    Ms. Oge. It is correct that I concur that the scientific 
work that was done in our office is the way to go. I would not 
suggest that I have read all of the thousands and thousands of 
modeling pages that have gone into this.
    Mr. Westmoreland. Sure, when you were looking at all the 
scientific evidence, how much evidence did you look at from the 
biofuel industry or from the farmer as to how these rules may 
affect them and did they have any input into how the rules 
would affect them based on the scientific evidence that you 
had?
    Ms. Oge. From the beginning of designing this rule, but 
also all the regulations that we do in our office, we pride 
ourselves to have an open and transparent process where we do 
have a dialogue with the regulated communities. In this 
instance, the regulated communities is refiners, the blending, 
the importers and the renewal fuel producers. So we do have a 
broad dialogue. Typically, we get together with associations to 
bring in individual members so from day one, we have had the 
dialogue, how we're going to do this rule.
    Mr. Westmoreland. You had a dialogue of how you were going 
to the rule, but did you have any dialogue into how this rule 
was going to affect the people that are actually making this 
stuff?
    Ms. Oge. It took about almost a year for the modeling to 
take place and for the results to be available. So the results 
became available, the preliminary results, I believe around 
August of last year. And as soon as we received the results, 
there were some impacts, like the biodiesel industry, so we 
brought them into our office and we shared with them those 
impacts. And because of those impacts we have attempted in the 
proposal to lay out options that will minimize the impacts and 
we're seeking comments and those are the options that I 
mentioned in my oral testimony, but those are in my written 
testimony.
    Mr. Westmoreland. And let me ask you this, being with the 
EPA for 29 years and being head of this department for the last 
15, how much time have you spent on a farm or out looking at 
some of these different places that produces biofuel and I mean 
I know that--just how much time have you actually spent out on 
a farm talking to some of these people that actually produce 
this or the feedstock or whatever that's there, that they've 
been able to show you the consequences of what some of your 
rulemaking decisions might have on them?
    Ms. Oge. My great grandfather and grandfather were farmers, 
but they were in Athens. That's where I grew up, in Greece. I 
have not spent any time on farms in the United States, if 
that's your question, but I have spent many, many hours meeting 
with farmers and meeting with renewable fuel producers 
throughout the development, not only of this standard. Let's 
not forget that RFS2 has been implemented, when it was still 
implemented RFS1, so we have spent a lot of time implementing 
RFS1.
    And I'm saying this with confidence that the industry that 
has been involved both RFS1 and RFS2, they will tell you that 
we have had an open door process. We have extended ourselves to 
talk to them and figure out what are the impacts and how we can 
minimize the impacts on those industries. But again, what we 
are doing here is we are implementing EISA, the way that 
Congress passed it and we're trying to do the best thing that 
we can to minimize the impact.
    We believe biodiesel is important, not only from fossil 
fuel emissions, but also it's important because it reduced 
particulate matter--
    Mr. Westmoreland. I've run out of time. I just wanted to 
know how much time you've spent on the farm. And let me make a 
suggestion to you. I made this same suggestion to some people 
from the Federal Reserve and FDIC. Get out of Washington and go 
spend some time with these farmers and these people that are 
actually producing the product. I think you'll get a new 
understanding for what some of your rules and regulations can 
do to them that we can come up with in some of these nice 
offices that we set up with, but when you go out and meet with 
them and see the things that they are doing to protect our 
environment and how they're re-using their water and what 
they're doing with their waste and what they're doing with 
their feedstock. I think you'd be amazed at that and it might 
give you a little bit more incentive to understand where 
they're coming from and what kind of scientific evidence that 
they would like to see these rules based on.
    Thank you very much.
    Ms. Oge. I'll give you a commitment from now to the 
finalizing rule I will visit the farm. Thank you. We will do 
that.
    Chairwoman Dahlkemper. Great idea. And I would now like to 
recognize the gentleman from Indiana, Mr. Ellsworth, for five 
minutes.
    Mr. Ellsworth. Thank you, Madam Chair. Ms. Oge, I was 
reading some of the testimony and I heard you talking about, I 
think we're talking about land conversions and one of the 
things you mentioned was satellite images. And there was a 
couple others. But I'd like if you could talk a little bit 
about that, how you looked at the land conversions, what that 
data brought you and how the satellite images, what that told 
you and if that dealt with the cause of land usage, what the 
pictures, and I think if I'm not mistaken, it was from 2001 to 
2004, those images. Do those pictures from the sky tell you why 
that might--and the other things too, I didn't hear what they 
were, but if you could just elaborate on that methodology.
    Ms. Oge. Basically, we looked at four models. GREET is a 
model that is used and developed by the Department of Energy. 
FAPRI and FASOM are peer-review agricultural models. Basically, 
the FAPRI model has been used for international use and the 
FASOM for domestic use.
    So let's talk about corn ethanol. To the extent in this 
country that we're using more corn towards the production of 
fuels, and less corn to export that our models between FAPRI 
and FASOM that will tell us where this additional production of 
corn will happen. That is the corn that is not going to be 
exported from the United States to the global market.
    And we're using the FAPRI model to tell us how much of that 
corn in 2022, the corn volume, will be produced in Brazil 
versus Nigeria or other countries. So we know that aspect of 
the indirect impact that our biofuel market will have. What we 
don't know though through FAPRI yet, is how--where is Brazil 
going to go to produce this additional corn? Are they going to 
use pasture land? Or are they going to use forests or are they 
going to use grassland? Or are they going to use a combination. 
And what we have done for this proposal is to use NASA 
satellite data that shows us historically where did Brazil go 
from 2001 to 2004 to additional land to produce additional corn 
or additional soy?
    For example, for the analysis that we have done, the 
proposal is based that the majority of the land that Brazil is 
going to use will come from pasture land where greenhouse gas 
effects will be very minimal. But then the data shows that 
about 4 percent, I believe 4.2 percent will come from forests 
and that has a huge impact on the greenhouse gas emissions. So 
what the analysis shows if that you do sensitivity analysis, 
and you show something less than 4 percent, let's say 0 percent 
from forests in 2022, what will happen from greenhouse gas 
emissions and you see that it's significantly different.
    And again, these are the elements that we're trying to peer 
review. The peer review has started of the satellite data and 
we believe we should have the results by end of June and we 
will put those results out for public comments.
    Mr. Ellsworth. So we're looking at Brazil and tracking what 
they did and then modeling the United States after that. And 
when you were also tracking taking into account other reasons 
other than just corn ethanol and that production and maybe less 
consumption or other uses or less demand? Are those all taken 
into account too?
    Ms. Oge. Yes, they are.
    Mr. Ellsworth. Okay, thank you. Madam Chair, I yield back.
    Chairwoman Dahlkemper. I now recognize the gentleman from 
Illinois, Mr. Schock.
    Mr. Schock. Thank you, Madam Chairman. Thank you, Ms. Oge, 
for being here. I guess my question to follow up on those that 
have been asked about, your rules, and my concern is 
specifically the impact on the biofuels industry and the 
country and specifically in my District which is the number one 
employer, that being agriculture.
    My understanding, and correct me if I'm wrong, is that the 
EPA's Renewable Fuel Standard 2 methodology assumes that for 
every acre of soybean crop that is used for or vegetable oil, 
let's say, crop that's used to produce a biofuel, an equal acre 
of ground is used then in the Brazilian Amazon or rainforest, 
is basically put into production to replace that acreage? Is 
that correct?
    Ms. Oge. I would need to check on that. Obviously, we know 
that it takes about 64 acres for a gallon of soy biodiesel. And 
it takes about 64 acres for corn, for corn ethanol and over 400 
acres for a gallon of biodiesel. So it's a factor of five. So 
clearly, you have much more land, it takes much more land, five 
times more to produce a gallon of biodiesel than it takes to 
produce of corn ethanol.
    I will have to get back to you in the assumptions of the 
amount of land that it will take in Brazil for soybean oil 
production versus the United States. I don't remember that 
data.
    Mr. Schock. But from reading your information it led me to 
believe the assumption is that for every 100 acres that's taken 
quote out of production or 100 acres in the United States 
that's used for biofuels, a 100 acres of Brazilian ground is 
put into production for soybean.
    Ms. Oge. I don't remember. The only thing I remember is 
that we're assuming that today and in 2022, you're going to 
have higher yields from soybean in the United States. I don't 
remember what we have done for Brazil. But again, I'll be glad 
to get back that information.
    Mr. Schock. Yes. Well, my concern is that with the new 
rulemaking it's going to put these biofuel industries out of 
business because my understanding is based on the current 
rulemaking that the vegetable oil or soybean biofuels will not 
meet your 50 percent greenhouse emissions standards that's 
required. Is that correct?
    Ms. Oge. Well, it is correct if you just look at soy-based 
biofuel, but what we have laid out in the proposal is an option 
is to allow the plants, the biodiesel plants to be able to 
average the use of waste grease and soybean and the majority of 
the plants do that today. I believe about 70 percent of the 
plants have the ability and they do blend soybean for a few 
months and then waste grease.
    So what we have proposed is an option that if you average 
the two, and then you lower the threshold from 50 to 40, about 
a billion gallons of biodiesel could be introduced in the 
marketplace to meet the standard.
    Mr. Schock. Okay. I guess what struck me was that based on 
what I read, the assumption was almost an equal swap. And in 
looking at the statistics in Brazil versus the United States, 
the assumption would be that you know basically as soybean or 
biofuels production in the United States increased, and that 
that crop was diverted, so to speak, to produce a biofuel, that 
there would be commensurate surge of the production of that 
crop in Brazil. And that is the assumption of what I read.
    I guess my concern is that that's a fallacy because the 
reality is during the same period where biofuels increased in 
the United States, the production of those same crops in 
countries like Brazil actually decrease.
    Ms. Oge. I have with me Sarah Dunham, who has just given me 
a note. She's in charge of our Climate Office. And she's 
telling me that in the model we're not assuming one-to-one 
ratio. So again, I'll be more than glad to get back to you on 
that.
    And again, that's the purpose of the public comment 
process. If we make assumptions that scientifically are not 
supported, we want to get the input and we want to change those 
assumptions. But according to the note that I received that's 
not the case. But again, we're going to respond back to you in 
writing.
    Mr. Schock. All I would say is that regardless of whether 
it was a one-to-one or a two-to-one, the fact of the matter is 
that the reaction has actually been negative, not positive in 
terms of the effective production of soybeans in Brazil at the 
same time and that crop in the United States has been diverted 
towards biofuel production. So I guess I would suggest that it 
might be a false assumption.
    Ms. Oge. Well, let me make it clear. We're looking at 2022. 
We're not looking today. So when we are doing the lifecycle 
analysis for biodiesel from soy, we're looking at 2022, how 
much biofuel will be required in 2022. And based on the FASSON 
and FAPRI models, what will happen in the United States in 2022 
for exporting soybean. And based on that, then we assume yield 
improvements and other factors, production improvements and 
that's where the data is coming from. So I don't think it's 
comparable that you can compare what is going on today with 
what we're looking about which is the 2022 production level. 
And that's again what the analysis is then.
    Mr. Schock. Sure, and I appreciate predictions. I just 
think that it's much easier to have a serious debate about 
what's happened over the past four years from 2004 to 2008 and 
talk specifically with facts on production as opposed to 
extrapolating what may or may not happen over the next ten 
years.
    I have one quick follow-up question if the Chairwoman would 
be so kind to let me ask and that is did you look at all about, 
since we're looking at cutting down on greenhouse emissions and 
trying to save specifically forests and acreage in Brazil, at 
the impact of our tariff on Brazilian imported ethanol and 
specifically sugar cane as a--because there's a debate here, 
obviously, on whether or not that should remain and the impact 
that's having on reducing the amount of acreage put into 
production there. Because I had the opportunity to travel there 
with Majority Leader Hoyer last month and met with members of 
their legislature who represent the Brazilian forests and their 
point is simply that for them to not put it into production is 
really to allow that land to do very little to generate 
revenue.
    And so if we remove those tariffs on the Brazilian sugar 
cane ethanol, I might suggest that there would be a great 
increase in the number or acres there put into production and 
what impact that has.
    Ms. Oge. We have not looked into removing the tariffs 
because when we are doing this analysis we assume the current 
U.S. policies. But let me assure you that we have had extensive 
dialogue with Brazil. I was in Brazil last year. I haven't been 
on a farm, but I did go to Brazil last year and I spent a whole 
week with both the government officials, but also with 
industry.
    They have given us extensive input, the only country that 
we have received extensive input on our models and we are in 
the process to include their data. We believe the data has a 
lot of basis to be included, so hopefully by the end of June 
we're going to be able to lay out the input they have given us.
    We also have committed that we will have a separate kind of 
expert meeting in Brazil with the scientists in Brazil and I 
think it's very important because Brazil and what is going on 
there has a very big impact because of the indirect land use to 
this regulatory program.
    Mr. Schock. Thank you.
    Chairwoman Dahlkemper. I now recognize the gentleman from 
Alabama, Mr. Griffith.
    Mr. Griffith. Madam Chair, I have no questions. Thank you.
    Chairwoman Dahlkemper. With no further questions I want to 
thank Ms. Oge and Ms. Cook for their testimony and for their 
answers. We will now get the second panel ready. Thank you very 
much.
    The second panel can assemble, please.
    [Pause.]
    Welcome to our second panel. Thank you very much for taking 
the time out of your busy days to come to Washington and 
testify today in front of this Committee.
    Again, I would like to tell the witnesses that you each 
have five minutes to deliver your prepared statements. The 
timer begins when the green light is illuminated. When one 
minute of time remains the light will turn yellow, the red 
light will come on when time is up, and I remind you to make 
sure you time on your microphone when it's your time to speak.
    Is my pleasure to introduce our first witness Mr. Mike 
Noble. Mr. Noble is the President of Lake Erie Biofuels in 
Erie, Pennsylvania, my District and my home town. Mr. Noble 
helped build the facility that represents the fourth biodiesel 
plant he has played a significant role in building. I'm proud 
to say that Lake Erie Biofuels is Pennsylvania's first large-
scale biodiesel production facility, producing 45 million 
gallons of biodiesel annually. As a leading producer of 
biodiesel in the northeastern United States and as one of the 
50 hottest companies in bioenergy, Lake Erie Biofuels has 
proven that they can compete on a national and even global 
level.
    Thank you so much for coming and to testify today.

                    STATEMENT OF MIKE NOBLE

    Mr. Noble. Thank you, Madam Chair. I'd like to thank the 
Committee for having me today. I'm going to speak on behalf of 
the RFS2 program mostly.
    Lake Erie Biofuels does produce a high-quality, low-carbon, 
renewable diesel fuel, replacement fuel. And it's readily 
accepted in the marketplace. The U.S. biodiesel industry is the 
only game in town when it comes to commercial scale production 
of biomass-based diesel as defined in the RFS2.
    The production of U.S. biodiesel is consistent with an 
energy policy that values a displacement of petroleum, diesel 
fuel with low-carbon, renewable fuel. There are significant 
energy security and environmental and economic public policy 
benefits associated with biodiesel use, yet the industry finds 
itself in the midst of an economic crisis which threatens the 
future and viability.
    The NBB and its associates are not seeking or asking for a 
creation of a new program, only a stable, reliable policy 
framework for the one that exists. Implementation of workable, 
realistic, RFS2 program is a key component to the framework.
    RFS2 for the first time requires a renewable component in 
the U.S. diesel fuel and provides a readily attainable schedule 
for biomass-based diesel that increases from 500 million 
gallons in 2009 to 1 billion gallons in 2012. To quality for 
the program, the renewable fuel must reduce greenhouse gas 
emissions by 50 percent compared to conventional diesel. But I 
would like to point out that the cutout for biodiesel, when 
they talk about the grandfathering, biodiesel--this cutout is 
not part of that grandfathering, so therefore we would not 
quality.
    The science pertaining to direct emissions is well 
established. The USDA and DOE lifecycle study was initially 
published in 1998 and has been continually refined and updated 
since this time. According to the model, biodiesel reduces 
greenhouse gas emissions by 78 percent. By statute, the EPA 
must consider significant indirect emissions when calculating 
renewable fuel emissions profiles. Unfortunately, the appears 
that the proposed rule by EPA unveiled May 5th relies on 
uncertain and inexact assumptions pertaining to indirect land 
use change, calculating biodiesel greenhouse gas emissions 
profiles.
    The result is that biodiesel produced from domestically-
produced vegetable oils are disqualified from the biomass-based 
diesel program and there are many factors unrelated to U.S. 
biodiesel production that impact land-use decision abroad. For 
example, in Brazil, forestry, cattle ranching, subsistence 
farming drive land-use decisions, yet the EPA proposed 
methodology appears to attribute this change to U.S. biodiesel 
production. This assumption defies common sense. If you look, 
in fact, at the acreage in Brazil dedicated to soybean 
cultivation actually decreased from 2004 to 2008, while U.S. 
biodiesel production increased from 25 million gallons to 690 
million gallons.
    If U.S. biodiesel production drove Brazilian land-use 
decisions to the degree that the EPA's proposed rule asserts, 
the opposite would be true. As a result of these dubious land-
use assumptions, the EPA's proposed rule restricts feedstock 
for low-carbon diesel replacement fuel to only animal fats and 
restaurant grease. Vegetable oils account right now for about 
60 percent of the feedstock that is available to meet the RFS2 
biomass-based diesel targets. And the RFS2 volume goals simply 
cannot be met if vegetable oils are disqualified from the 
program. Even under the so-called pathway for biodiesel that is 
briefly outlined in the proposed rule, there will not be enough 
feedstock available to meet the RFS2 volumes for biomass-based 
diesel. This outcome is not consistent with either sound 
science or sound energy policies.
    Lastly, U.S. agriculture has historically released 
increased productivity yields. As technology improves, it is 
reasonable to assume that these gains in efficiencies will 
continue. As these efficiencies are realized both domestically 
and around the globe, the impact of the land use change to 
biofuels production will be further diminished and this must be 
recognized in the EPA's greenhouse gas emissions calculations.
    I'd like to thank you for having me today. That's it.
    [The prepared statement of Mr. Noble is included in the 
appendix.]

    Chairwoman Dahlkemper. Thank you. I would like to now 
introduce Mr. Wootton. Mr. Wootton is the president of Keystone 
Biofuels in Shiresmantown, Pennsylvania. Mr. Wootton has worked 
with the Governor of Pennsylvania and the State's Legislature 
to pass several biodiesel bills in 2008. He has truly been a 
leader in Pennsylvania's on-going support of renewable energy. 
Keystone Biofuels is a manufacturer of biodiesel utilizing 
soybean oil provided by Pennsylvania farmers. Welcome.

                    STATEMENT OF BEN WOOTTON

    Mr. Wootton. Thank you. Chairwoman Dahlkemper, Ranking 
Member Westmoreland, and Members of the Subcommittee, I thank 
you for the opportunity to testify today. I'm here on behalf of 
Keystone Biofuels, a small biodiesel production company located 
in Pennsylvania. We are the longest-running biodiesel 
production facility in the state and work extensively with 
state and federal public officials informing and implementing 
good public policy on biodiesel.
    Biodiesel is a high-quality, low-carbon renewable diesel 
replacement fuel that is readily accepted in the marketplace 
today. I applaud you and the Committee in taking an interest in 
the impacts of outstanding regulatory policy of small biofuel 
producers and family farmers. Although there are several 
outstanding regulatory issues that impact biodiesel, I'm going 
to focus my attention today on the 2008 Farm Bill, Section 
9005, which Congressman I think you were asking about earlier. 
It's the bioenergy program for advanced biofuels. It's the old 
OCC program.
    This program provides support to, among others, biodiesel 
producers, to help offset feedstock costs. Specifically the 
program provides for $300 million in mandatory funding over a 
five-year duration of the Farm Bill. Ethanol produced from corn 
would not qualify for the program. It creates two classes of 
producers for purposes of payments. Producers with a production 
capacity smaller than 150 million gallons would be eligible for 
90 percent of the money provided in the program. Producers with 
a capacity of over 150 million gallons would qualify for the 
remaining five percent.
    The U.S. biodiesel industry is facing an economic crisis. 
Plants are having difficulty accessing operating capital. In 
addition, there's a reduced demand for biodiesel due to the 
economic downturn and delayed implementation of the RFS2 
biomass-based diesel schedule. Due to current market 
conditions, less than one third of the industry's facilities 
are currently producing fuel. Feedstock costs make up more than 
80 percent of our production costs. Over the past year, 
feedstock costs have remained volatile, reaching record highs 
and making it difficult to economically produce the fuel.
    A bioenergy program that provides payments on all gallons 
of production will help all U.S. biodiesel producers displace 
petroleum with clean-burning, domestically-produced biodiesel.
    So what are the U.S. benefits from increased production? 
Energy security. The U.S. biodiesel industry is providing both 
new fuel and new refining capacity to the nation's energy 
infrastructure. Nearly 700 million gallons of biodiesel were 
produced in 2008 displacing almost 28 million barrels of 
petroleum. It's also friendly for our environment. Biodiesel 
reduces lifecycle carbon dioxide emissions by 78 percent. The 
700 million gallons of biodiesel produced last year represents 
over 11 billion pounds of carbon reduction. That's equivalent 
of removing over 900,000 passenger vehicles from the nation's 
roadways.
    It also creates jobs in rural America. Production in 
America's biodiesel plants in 2007 added over $4 billion to the 
U.S. economy; increased household income by over $960 million; 
and supported over 21,000 jobs.
    The President has declared this week National Small 
Business Week. He said and I quote, ``the entrepreneurial 
spirit lies at the core of our nation's economy and identity. 
If Americans with good ideas can work hard, put their plan to 
the test, and succeed, the American economy will continue to 
create jobs and lead the world in innovation and 
productivity.''
    The U.S. biodiesel industry is doing just that. Our 
industry's ingenuity and hard work are critical to our nation's 
prosperity. Small businesses are the lifeblood of cities and 
towns across the country. Over the last decade small businesses 
created 70 percent of all new jobs. Our industry, with the help 
of the Committee, can contribute and lead the way to 
prosperity, particularly in today's challenging economic 
environment. The nation that leads the 21st century clean 
energy is a nation that will lead the 21st century global 
economy. America can and must be that nation.
    The production use of biodiesel is consistent with an 
energy policy that values the displacement of petroleum diesel 
with low-carbon, renewable fuel. This is a necessary program to 
continue the development of biodiesel nationwide.
    We encourage a consistent program with the following:first, 
a feedstock neutral program; and second, a program that is 
measured on the gallon of biodiesel, rather than on feedstocks 
or some other methodology.
    In conclusion, I encourage your Committee to urge the USDA 
to move expeditiously in implementing the bioenergy program and 
provide payments to U.S. biodiesel producers in the Fiscal Year 
2009, retroactive to October 1, 2008. Our single priority is to 
ensure that the bioenergy payments are provided on all gallons 
of biodiesel produced. Our challenge is that the policy was 
passed last year and the biodiesel issue is still waiting for 
USDA to implement the program. The $300 million provided by the 
bioenergy program for advanced biofuels will help bring 
stability to our industry so that biodiesel can continue to add 
to the nation's fuel supply.
    Thank you.
    [The prepared statement of Mr. Wootton is included in the 
appendix.]

    Chairwoman Dahlkemper. Thank you, Mr. Wootton.
    I'd like to now introduce Mr. Bafalis. Mr. Gregory Bafalis 
is the president and CEO of Green Earth Fuels located in 
Houston, Texas. He has more than 20 years of project 
development experience in the energy sector. Green Earth Fuels 
supplies energy companies with biodiesel fuel and bioproducts.
    Welcome, Mr. Bafalis. Did I pronounce your name correctly?

                  STATEMENT OF GREGORY BAFALIS

    Mr. Bafalis. You did. Thank you. I thank the Committee for 
having me here today. Before I get started on my remarks, I 
wanted to try to correct a misstatement that the Director from 
the EPA said before. I believe she said it took 64 acres to 
make one gallon of ethanol and 400 acres to make one gallon of 
biodiesel. In fact, it's 400 gallons of ethanol from one acre 
of corn and 64 gallons of biodiesel from one acre of soybean. I 
hope that's not the same math they're using when they do the 
indirect land use.
    I submitted written testimony and I'm not going to go 
through that as such. I'd actually like to focus more on some 
of the issues that are facing us and focus on the dire straits 
of this industry. We've done a lot of things right in my 
company. We're located on the Houston ship channel in the heart 
of the petroleum complex. We've purchased cheap feedstocks. 
We've always made quality product. We've always delivered on 
time, met all of our contracts. But despite everything that 
we've done, we've even invested millions of dollars in cutting-
edge feedstocks to try and provide for the future, even with 
all of that, we're in dire straits. And if we're in dire 
straits, I can only imagine what the rest of the industry is. 
In fact, I think if you looked at the production capabilities 
of Houston, Texas, there's something in the neighborhood of 350 
million gallons of producers there. And in fact, I think we're 
the only one running right now and we're running on about a 25 
percent capacity.
    If this industry goes down, it's going to lose 29,000 jobs. 
You've got billions of dollars that have been invested by 
private equity firms, by banks, by individuals such as myself, 
that it's just going to go away. And when you go to do the 
second generation that same money is not going to be there 
again. It will take years, maybe never, for it to come back.
    There are really four reasons we got in this situation. The 
first one everybody has been talking about for months is the 
frozen capital markets. We depend on working capital to 
survive, bank loans to survive. And of course, as everybody 
knows those have pretty much dried up. There really is a lack 
of market in the United States for biodiesel. The RFS was put 
in place in the past two years or so. It's taken EPA almost two 
and a half years now to gets its draft rule out. To be quite 
frank, the major oil companies have told us we're not going to 
buy until the RFS is out, until the rules are clear, and we 
know exactly what the game looks like.
    So we've been forced to sell into overseas markets, 
predominantly Europe. The Europeans recently came out and put 
protectionist measures in, so now that market is closed for us. 
And now you have a U.S. industry with the majors waiting for 
the RFS, with absolutely no markets for us outside the United 
States and we are struggling to make ends meet on a month-to-
month basis.
    Third, the sheer nature of our tax credits, year to year, 
we don't know if they're going to be there next year. The 
capital markets don't know if they're going to be there the 
next year. Our investors don't know if they're going to be 
there next year. Most importantly, our customers don't know if 
we're going to be there next year. Going on a year-to-year 
basis is just killing us because we are just hoping like we did 
last year in October, we get that extension so we can go out 
and we can contract into the next year.
    And finally, I think as Mr. Noble has said, the indirect 
land use is absolutely killing us. If that comes out, if that 
comes out in the RFS, we will not have U.S. feedstocks. We will 
not be able to produce biodiesel and we will certainly be out 
of business.
    I'll focus a little bit on the RFS for a second, because I 
mentioned big oil. Big Oil is waiting for the rules. Quite 
honestly, I can understand that. They're not going to go out 
and buy a bunch of soybean-based biodiesel only to find out in 
six months that gee, that doesn't count. You just bought 100 
million gallons and it doesn't count. So they're waiting for 
the rules. But the problem is that the rules take six months to 
get out. We're going to be well into the fourth quarter. Big 
Oil has also told us well, gee, if it doesn't happen until the 
end of the year, then guess what? We're going to go to Court 
and we're going to fight it because we don't have time to 
implement it now.
    Now if you push me out into 2010 before I can have an RFS 
to sell under, I'm out of business. And if I'm out of business, 
guess what Big Oil is going to say then? Well, there's no 
producer, so I can't buy biodiesel. So this industry will 
certainly be dead. So we need to get the RFS out now. We need 
to get it out with indirect land use out of it. I lived in 
Brazil for seven years and I did it in the '90s and they were 
clearing the rainforest when I lived there and there was no 
biodiesel industry in the United States. I can remember when 
Sting was trying to save the rainforest and that was well 
before we all existed, the folks here at this table.
    And finally, we need to get a tax credit that is something 
that we can count on, something that will last for more than 
one year, more than six months, something that we know, just 
like the renewable electric industry got in the most recent 
stimulus package, we need something that we can count on for 
the next five years, so we can go out and contract long term, 
so we can go out and sell long term and so that the major oil 
companies know that they can count on us and we're going to be 
there for the future.
    Thank you.
    [The prepared statement of Mr. Bafalis is included in the 
appendix.]

    Chairwoman Dahlkemper. Thank you, Mr. Bafalis.
    Mr. Gaesser, did I pronounce that correctly? Mr. Ray 
Gaesser is an Executive Committee Member of the American 
Soybean Association. He is a soybean producer from Corning, 
Iowa. He has been a member of the Iowa Soybean Association 
since the 1980s. The American Soybean Association develops and 
implements policies to increase the profitability of its 
members in the entire soybean industry. Thank you for joining 
us today.

                    STATEMENT OF RAY GAESSER

    Mr. Gaesser. First, I'd like to thank you all for allowing 
us to speak today. My name is Ray Gaesser. I'm a farmer. My 
family and I grow soybeans and corn in southwest Iowa. We've 
been there for 31 years. We actually grew up in Indiana and 
moved there 31 years ago. I've got a lot of experience in 
Brazil, in South America, in particular. I've got a lot of 
experience in the Iowa Legislature. Also, I work with our local 
economic development and economic development is so important 
locally and nationally and the biodiesel industry, the 
renewable fuels industry has been such a benefit to rural 
economic development. And I would hate to see any of the new 
rules destroy that opportunity.
    As I say, we've been farming for a long time there. I've 
had some experience in Brazil. We've had agriculture students 
come to our farm and stay with us. We understand the industry 
down there. We know their families. I probably know as many 
agronomists and farmers in Brazil as I do in the United States. 
So it's very important that we understand when we make rules 
about indirect land use that we have all the facts. And I have 
a good friend who is a researcher and he says if you torture 
the data long enough it will tell you anything you want and 
that's what I'm afraid has happened here.
    The assumption that EPA is using about the increase in land 
use in Brazil from 2001 to 2004 is probably accurate, but it 
was not because of biodiesel. It was because of currency 
issues. It was because of tax incentives. It was because of 
incentives for money to grow agriculture in the country. It had 
nothing to do with renewable fuels. So I think we need to 
understand that maybe they should use information that after 
2004 when the majority of the renewable fuels were implemented 
in the United States.
    One of the other concerns that we have is the whole 
feedstock issue with certifying the feedstock for biodiesel 
producers in the United States. It is really difficult to 
certify all the hundreds of thousands of growers who might 
deliver soybeans to processors or to actually biodiesel plants. 
It would be history of production of the United States is that 
we've used up most of the available agricultural land, 
virtually all of it has a cropping history and it would be 
almost impossible to certify all the growers. And maybe we 
should certify the growers who are growing soybeans or corn on 
land that hasn't got a crop history, rather than requiring 
hundreds of thousands of producers to certify. So it's really 
difficult for the industry to certify everyone. It would be 
much easier to take the very, very few that are not in 
compliance and make them certified.
    I don't know what my time--oh, there it is. Okay. And has 
been stated earlier, the bioenergy program is so important to 
our industry and so important to the viability of the biodiesel 
industry, we really need to get that implemented in a timely 
fashion and get it funded in a timely fashion so that's one of 
the very important issues to ASA.
    The whole issue about indirect land use seems to be, as it 
was stated early in direct conflict with our energy policy. We 
have two organizations that are conflicting. We have one that's 
trying to increase our energy security and the other 
organization it seems like they're doing everything they can to 
be a detriment to renewable fuel. So that's a huge concern to 
me also.
    I'd just like to thank you for this opportunity to speak to 
you on behalf of ASA and myself as a family farmer. Thank you.
    [The prepared statement of Gaesser is included in the 
appendix.]

    Chairwoman Dahlkemper. Thank you for your testimony. The 
bell tells us we have votes. We're going to try to get through 
the next witnesses, and then we will break while we go over and 
vote . There will be a series of three votes, and then we will 
come back for the questioning . I'm going to now turn it over 
to the Ranking Member, Mr. Westmoreland, for the next two 
witnesses.
    Mr. Westmoreland. Thank you, Madam Chair. Zippy Duvall has 
been president of the Georgia Farm Bureau since December of 
2006, a third generation Greene County dairyman, Zippy retired 
from the dairy business in 2005. He now operates 150 breed cow 
beef operation, produces and sells quality hay, and is a 
poultry grower, producing about 480,000 broilers a year. A Farm 
Bureau member since 1977, Mr. Duvall currently serves on the 
Greene County Farm Bureau Board of Directors and has held 
numerous leadership positions in the County Farm Bureau 
including president and vice president. In 1982, he was named 
Georgia Farm Bureau and the American Farm Bureau Young Farmer 
of the Year. Zippy Duvall is the real deal. Zippy, welcome.

                   STATEMENT OF ZIPPY DUVALL

    Mr. Duvall. Thank you, Congressman. I'm glad to be here.
    Congresswoman, we have something in common. My mother comes 
from Pennsylvania, Westover, Pennsylvania, but unfortunately, I 
took on my daddy's speech patterns in Georgia and we don't 
quite do things, talk as fast as most people do.
    Chairwoman Dahlkemper. Well, that's great, you have 
Pennsylvania roots.
    Mr. Duvall. That's right. I'll try to get through it real 
quickly because I know you've got to vote.
    So I thank you for the opportunity to come to talk to you 
about renewable fuels standards and the Congressman told you 
where I come from. I am a true farmer, even though I am the 
president of the Georgia Farm Bureau that represents 400,000 
members across our state. The one thing he did not tell you was 
that my farm has about 300 acres of forest land on it and 
that's important to note when I go through my testimony.
    Regarding renewable fuels standards, the farm sector in 
Georgia strongly support the increased use of domestic 
renewable fuel. We believe biofuels are a key component to 
increase our nation's energy security. Many of us remember the 
1970s and the energy problems we experienced at that time. 
There were long lines at the gas stations and the gas pumps 
couldn't even reveal the price. We had to double the price of 
the gas during that time. Unfortunately, during that time 
Americans vowed, fortunately, vowed to become more energy 
independent, but unfortunately we lost our resolve and as soon 
as the price of gasoline as you referred earlier, Madam 
Chairman, we started going backwards. And the result today is 
we're held over the same barrel of oil, held hostage again 40 
years later.
    Recent events, 35 years of history should have taught us 
that America needs to be more self-reliant when it comes to our 
energy needs. The renewable fuel standards is an important step 
to recognizing the biofuels like ethanol, biodiesel, that they 
burn cleanly, clean transportation fuels and they lessen our 
dependency on foreign oil. And they also revitalize rural 
America.
    American farmers today provide food, fiber, feed, and fuel 
for our country. We welcome the challenge and we believe that 
American people will continue to be well served by farmers.
    While Georgia farmers look forward to serving the needs of 
our people, we do have concerns about the proposed regulations 
offered by EPA. The RFS passed in the Energy Independence 
Security Act of 2007 requires new biofuels to emit 20 to 60 
percent fewer greenhouse gas emissions than gasoline to be 
eligible for the RFS program. Our members have serious concerns 
about the terms, indirect land-use change, and lifecycle carbon 
emissions and how these concepts would be measured and 
implemented.
    We do not believe that there is a reliable way to measure 
accurately and to predict the production of biofuels that 
affect land use here and in other countries. For our farmers, 
the market directs, dictates which crop that we plant and it 
also decides where that crop will be grown. If there's 
sufficient demand for a crop, farmers will produce it; and if 
the market persists, greater efficiency follows.
    When my father was a boy, velvet beans were an important 
crop and 30 bushel corn was considered an average yield. Today, 
30 bushel corn is considered a crop failure and I don't know 
that there's anybody in Georgia that can remember seeing a 
field of velvet beans any more.
    Improved plant varieties, new technologies, and more 
efficient agricultural practices have produced greater crop 
yields with higher quality. My grandfather could have never 
imagined today's farm productivity. Likewise, it is unrealistic 
to think that anyone can predict how agriculture will evolve in 
this future based on the single variable of biofuels 
utilization. New and uncertain science to predict land use 
change has no place in federal regulations.
    Georgia produces more forestry products than any other 
state in the Union. Seventy-two percent of our forests in our 
state are privately owned. We believe that it is important that 
the forest biomass be a source of renewable fuels.
    The RFS in the energy bill did not include all forms of 
forest biomass and we believe that is unfortunate. Under the 
standard, the only forest biomass considered renewable is that 
``actively managed tree plantations.'' My own farm would not 
qualify under that definition. The reason for such a narrow 
definition is unclear, but the result is that many family 
forest owners will be precluded from active participation. If 
the purpose of the standard is to increase the use of forest 
biomass, the definition should be as broad as possible 
encourage the use.
    Farm Bureau supports changing the definition of renewable 
biomass to include all forms of forest biomass. It is important 
that legislation should be as inclusive as possible regarding 
energy feedstocks and methods.
    The State of Georgia uses about five billion gallons of 
gasoline annually. Of that amount, only seven percent of it is 
ethanol. We continue to support traditional corn-based ethanol. 
We encourage the Federal Government to revisit the existing 
limit on ethanol blending which is currently capped at 10 
percent per gallon of gasoline. Moving to a 15 percent blend 
would encourage more ethanol utilization.
    Many of our farmers in south Georgia that are members of 
our organization are part owners of the First United Ethanol 
LLC in Mitchell County, Georgia. This facility now produces 100 
million gallons of ethanol per year and is adding to the local 
rural economy.
    Chairwoman Dahlkemper. Just for the sake of time, we'll get 
more of your testimony in our questioning, if we can move on.
    Mr. Duvall. Thank you for your time.
    [The prepared statement of Mr. Duvall is included in the 
appendix.]

    Mr. Westmoreland. Madam Chair, I'll now introduce Dr. Das.
    Chairwoman Dahlkemper. I recognize the Ranking Member, Mr. 
Westmoreland.
    Mr. Westmoreland. Dr. K. C. Das is Associate Professor and 
Coordinator of the Biorefinery and Carbon Cycling Program at 
the University of Georgia. His current work and interest focus 
on biomass conversion to energy and value-added products like 
chemical feedstocks and bioproducts. Through his research he 
has authored or co-authored 43 peer-review journal articles, 
six book chapters and 95 conference papers and has participated 
as principal or co-principal investigator in over 50 federal, 
state, or industry-funded projects.
    He teaches senior-level engineering process design and 
environmental engineering courses at the University of Georgia.
    Dr. Das, welcome to the Small Business Committee.

                     STATEMENT OF K. C. DAS

    Mr. Das. Thank you, Congressman. Madam Chairman, Members of 
the Committee, it's a pleasure for me to be here to testify.
    In our research at the University of Georgia, I head the 
Biorefining and Carbon Cycling Program. The primary goal of 
this program is to develop technologies that reduce the carbon 
footprint, reduce greenhouse emissions, produce biofuels 
sustainably and create jobs in rural areas.
    It's my opinion that as we transition from the current 
fossil-based fuel economy to a more renewable energy economy, 
we have an opportunity and probably even an obligation to 
design a system of energy delivery that is sustainable and 
minimizing the net greenhouse gas emissions is a critical part 
of that.
    I'd like to touch on four points. First, if the goal is to 
minimize greenhouse gases and create jobs in rural areas and 
income to farms, the first thing we should do is go after 
residues, agricultural residues, forest residues. There are a 
variety of industrial waste materials that are presently put in 
landfills or are under-utilized. It's well established that the 
greenhouse gas load of converting of waste into energy is very 
low and there are lots of technologies that can utilize these 
materials at the present moment.
    It appears to me that this is not completely utilized.
    The second point I'd like to make is that if you want a 
sustainable biofuel future, we've got to diversify our options 
of crops available, particularly those crops that are grown 
with minimal inputs such as sorghum which is a drought-
resistant crop, can grow in marginal soils. Also a crop like 
oilseed radish. It's a winter cover crop that is used around 
the country, but nobody has ever looked at it as a biofuel crop 
and it has potential. The University of Georgia recently 
conducted some studies that are very promising.
    The third thing I'd like to touch upon is if our goal is to 
reduce carbon footprint and create jobs, we've got to be open 
to a variety of other technologies than liquid transportation 
fuels alone, for example, anaerobic digestion. This is an old 
technology that's been around, but it's not presently very high 
on the spectrum of ultimate fuels, primarily because the 
product of anaerobic digestion is methane which is a gas and if 
you look at the carbon footprint of that compressed natural gas 
coming from anaerobic digestion it is very, very low. There are 
people around the country, primarily in the private investment 
that are exploiting that, but assistance from the government to 
make that a far-reaching impact would be of far greater 
assistance.
    A related technology is the algae biofuels. Its cutting-
edge technology very recently has come up in the spectrum and 
therefore it's a little behind corn, ethanol or lignocellulose 
ethanol, therefore, when you compare them directly, algae 
biofuels have disadvantages from a greenhouse gas angle. So 
some alternative form of support for these cutting-edge 
technologies that are just beginning to come into the spectrum 
is useful.
    The last thing I'd like to point out is today we are going 
after biofuels because biofuels are carbon-neutral and that's 
absolutely the thing to do, but the challenge in the future is 
reducing the CO2 that's already in the atmosphere and one very 
appropriate technology to do that is the use of biochar. 
Biochar is a carbon-based byproduct of energy production. At 
the University of Georgia, among other universities around the 
world is leading the technology development and technology 
transfer in this area. One of our Georgia companies, Range 
Fuels, is also a company that's working with similar 
technology.
    The byproduct of biochar is used as a carbon sequestration 
technology in soils. It has significant agronomic benefits. It 
sequesters carbon for many years, in the thousands of years. 
It's easy to quantify and will create local jobs. However, from 
what I see, there's very little discussion at the national 
level, at the federal agencies, or within the existing 
legislature or outstanding legislation that discuss this and 
I'd like to bring that to your attention.
    Thank you very much.
    [The prepared statement of Dr. Das is included in the 
appendix.]

    Chairwoman Dahlkemper. Thank you, Dr. Das. We're now going 
to recess for approximately 30 minutes while we go vote. We 
will reconvene at approximately 12:10. The Committee now stands 
in recess.
    [Off the record.]
    Chairwoman Dahlkemper. We now reconvene the Small Business 
hearing.
    Thank you for your patience. It took us a little longer 
than we thought, but we're glad that you stayed and have the 
opportunity to ask you some questions.
    I'm going to open this first question up to the panel. I'm 
also on the Agriculture Committee, and these issues tie 
together with both of my Committees. Legislation has been 
introduced in the House and the Senate by Colin Peterson, the 
chairman of the Ag. Committee that would eliminate the EPA's 
ability to take into account international indirect land use. 
As we know indirect land use has been used to calculate land 
conversion, within the RFS2 proposed rule. If we were 
successful would this change adequately account for the 
environmental impacts of biodiesel production?
    Would anyone like to address that question?
    Mr. Gaesser. Could you repeat that one more time?
    Chairwoman Dahlkemper. Colin Peterson has introduced 
legislation that would eliminate the EPA's ability to take into 
account international indirect land use and I'm just wondering 
if that change happens, would that change adequately account 
for the environmental impact of biodiesel production?
    Mr. Gaesser. I think it would probably be a good start at 
least. I guess our concern is that if we open up the law or the 
rules, what other changes might happen that would be 
detrimental to the biofuels industry.
    We think with the right definition of indirect land use 
internationally, there's probably not a problem with soy 
biodiesel, but it would be a help as long as we don't, when we 
open up the bill or open up the rules that we don't make other 
changes that are detrimental.
    Chairwoman Dahlkemper. Do you have any thoughts on what 
that definition should be?
    Mr. Gaesser. I think it's a--if they're realistic about 
what really happened in the industry in South America, 
particularly, since the biodiesel has been expanding in the 
United States, it they use those, that information, it would be 
a whole different story about indirect land use. And another 
thing, how do you extrapolate into 2022 what we're going to 
plant or what they're going to plant? Economics make the 
decision for us to a big point. I think a lot of the 
methodology is flawed and there would have to be some changes 
in the whole method of looking at indirect land use.
    Chairwoman Dahlkemper. Would anyone else like to address 
that question?
    Mr. Bafalis. If you go back to what the Director said, I 
think she said 70 to 80 percent of the impacts come from the 
indirect land use internationally and the greatest uncertainty 
they have around the science is the international element of 
it.
    I'm not sure. I don't believe the science is there yet. It 
may be one year away. It may be five years away. I think that 
looking at the direct impacts that we can quantity now is the 
right way to do it right now. And then when the time comes and 
the science is right and we can make that leap of faith that it 
can plant one acres here and it affects one acre there which 
I'm not sure I can make that leap of faith, that maybe it's 
two, three, four, five years out, but I just don't think the 
science is there. So yes, I think that change does address the 
impacts of biofuels right now.
    Chairwoman Dahlkemper. Thank you. Mr. Noble, if the RFS2 
becomes final as currently drafted, what impact do you think it 
would have on the labor market and new green jobs?
    Mr. Noble. Well, since now it would pretty much ruin the 
biodiesel industry. I think someone has indicated how many jobs 
were in the biodiesel industry.
    Chairwoman Dahlkemper. Would that basically close down your 
plant?
    Mr. Noble. Yes, because even though we could run on yellow 
fats and animal greases, the industry would be done and 
therefore nobody would be interested in buying it anyway, so we 
would be done.
    Chairwoman Dahlkemper. Of course this industry has 
generated state and federal tax revenues. What can we expect, 
do you think, that the impact would be then on the U.S. 
Treasury and State budgets?
    Does anyone have an answer?
    Mr. Wootton. It would be significant. The testimony I gave 
earlier, we're talking about an economy of $4 billion for 
biodiesel and you'd be limiting the number one feedstock that 
we use to make that fuel at a time where we need jobs. What I 
got out of this morning's first hearing was, it was our best 
guess efforts to this process. I think trying to apply that 
thinking to something that's so good for this country, creating 
jobs, creating energy, shovel-ready energy independence, I 
think that's the wrong approach to be using best guess efforts 
on eliminating something so good.
    Chairwoman Dahlkemper. Mr. Gaesser, do you want to comment 
on that?
    Mr. Gaesser. Yes, the information that ASA has would be 
$866 million in tax revenue to the Federal Government.
    Chairwoman Dahlkemper. $800--
    Mr. Gaesser. $866 million.
    Chairwoman Dahlkemper. To the U.S. Treasury?
    Mr. Gaesser. Yes.
    Chairwoman Dahlkemper. Thank you. Mr. Bafalis, you indicate 
that you expect small producers will fail this year without 
help. How long do you believe they can survive without a 
renewable fuel standard?
    Mr. Bafalis. I think quite a few have probably gone under. 
I know in the Houston area, we're probably the only one of five 
running right now. It really depends on how much money they 
have, but basically we're all burning cash. We're just staying 
there spending money and not doing very much. So if this goes 
beyond or well into the fourth quarter, I think most of the 
industry will end up failing.
    Chairwoman Dahlkemper. Would an emergency RFS issued by EPA 
for biodiesel help you survive at this point?
    Mr. Bafalis. Immensely. That would get the customers back. 
That would get major oil to start buying the product and we'd 
all be back in business.
    Chairwoman Dahlkemper. Thank you. I'll now recognize Mr. 
Westmoreland, the Ranking Member.
    Mr. Westmoreland. Thank you, Madam Chair. And I'll open 
this up to any of you. Were any of you ever contacted in your 
professional positions as to what effect any of these rule 
changes or any of this legislation that's been passed here 
would affect your business or your ability to do business?
    Mr. Bafalis. Directly, no.
    Mr. Gaesser. I just talked to Tom and ASA had no one from 
EPA contact them. You would think they would.
    Mr. Westmoreland. You would.
    Mr. Duvall. Congressman, I can't speak for American Farm 
Bureau, but Georgia Farm Bureau has not been contacted.
    Mr. Westmoreland. Any from the educational?
    Mr. Duvall. Not that I know of.
    Mr. Westmoreland. Academic, okay. That's one of the 
problems that we have up here. We--and I guess I'll include 
myself in on this, but a lot of times people up here think they 
know more about your business than you know and especially that 
goes for the elected and the not elected sometimes are even 
worse, as far as writing some of these rules and regulations.
    Mr. Bafalis, you mentioned the--I believe it was you that 
mentioned the grants, the USDA, about the ones that produced 
151 gallons or more or was it you--
    Mr. Wootton. It was me.
    Mr. Westmoreland. Mr. Wootton.
    Mr. Wootton. Yes.
    Mr. Westmoreland. Okay. You mentioned that. Is that going 
to be, how many gallons do you produce or do you all produce 
that--
    Mr. Wootton. We have a capacity of 20 million gallons a 
year, but we're only producing about 2, so the 150 million 
gallon benchmark for the 95 percent of the funds available is 
going to include most of the industry, maybe a handful of 
producers that are over that capacity.
    Mr. Westmoreland. So that would probably include 99 percent 
of them?
    Mr. Wootton. I would say.
    Mr. Westmoreland. Since there are very few that probably 
produce more than that.
    Mr. Wootton. Yes.
    Mr. Westmoreland. And let me ask Dr. Das a question. You 
know all the money that we're spending that goes along with 
green energy or whatever, what percentage of that is going into 
studying it, you know, looking at the consequences of it and 
how it's paying off? How much of that is going into that part 
of the science, rather than just giving it to folks that are 
kind of leading the charge on this?
    Mr. Das. Congressman, I don't know the exact numbers, but I 
keep track of a lot of the funding opportunities that come out 
from the USDA, DOE. Most of those are in either the development 
of technology or conversion aspects and as far as I remember 
there's not any that actually looks at the impacts of 
technology on the wider economy or the environment that is 
directly available.
    Mr. Westmoreland. And how about the research and 
development of these different types of things. You mentioned 
the biochar. How much money out of this, let's just use the 
stimulus package.
    Mr. Das. Yes.
    Mr. Westmoreland. The billions of dollars that we had 
there, how much of that money went into research and 
development on some of these biofuels?
    Mr. Das. As far as I know there's no money in there for 
biochar and it is listed, it is authorized under the Farm Bill, 
but it has not been picked up by the federal agencies and 
supported.
    Mr. Westmoreland. Thank you. Mr. Duvall, you were talking 
about the forest part of it, the managed forest, I guess, as 
far as the biomass.
    Mr. Duvall. Right.
    Mr. Westmoreland. Can you explain how this rule is kind of 
working against us on that?
    Mr. Duvall. In Georgia, according to the Georgia Forestry 
Commission, we have about 28 million acres of forest land with 
biomass on it. And under the definition that's in this act, 
only about 7 million of those 25 million would be classified in 
that range. A lot of the small family farms are just not going 
to be able to fit under that definition because they're not a 
tree plantation.
    Mr. Westmoreland. And the word there was managed.
    Mr. Duvall. Right, a managed tree plantation.
    Mr. Westmoreland. And why would they include that language, 
to so narrowly focus on it? Do you have any reason?
    Mr. Duvall. You know, I can speculate what their intent 
was. It maybe go back to how land is being used and what the 
potential of the trees that might be cut if they let all of it 
be accessible, but in Georgia, we're going to grow the biomass. 
If it's cut, it's going to be replanted, and we're going to 
grow jobs. We're going to grow jobs with trees. That's just 
what we do in Georgia, because that land is what it does best.
    Mr. Westmoreland. And Dr. Das, you're a professional in 
this, but some of those trees that we have and that may be on 
some of these farms that fall and are rotting, don't they put 
off an emission that's bad for the atmosphere?
    Mr. Das. Absolutely. Most trees generally have a lifecycle 
of about 30 years and all that carbon is simply going back into 
the atmosphere.
    Mr. Westmoreland. And so all of these trees I see where 
it's got the beetle infestation and dying and stuff, if they're 
on somebody's private land, it's not on one that's managed, 
that doesn't count, right?
    Mr. Das. Yes, that's correct. Ideally, that good biomass 
that could go very well into the process of biofuel production.
    Mr. Westmoreland. Thank you.
    Chairwoman Dahlkemper. Following up on that, what would you 
say would be, Mr. Duvall, the potential income to farmers, if 
just half of the private forest land were eligible?
    Mr. Duvall. I'd be scared to really say that, but we could 
do some more research and try to get that to you, Madam 
Chairwoman. But it would be significant. I assure you.
    Chairwoman Dahlkemper. Also, I guess, Mr. Gaesser, what 
would farmers do in terms of replacing lost demand for soybeans 
if the impact is what we think it could be for soybean demand?
    Mr. Gaesser. There's been a really great benefit from the 
farmers' perspective when we have--since the biodiesel industry 
has been expanded because it's increased our market. It's given 
us an opportunity to market excess soybean oil in the United 
States to our biodiesel producers. And we have some studies 
that indicate that last summer as much as $2 a bushel of the 
price of soybeans was equated to biodiesel. Currently it's less 
than that, but it's still a huge benefit to family farmers, 
soybean producers around the country.
    Chairwoman Dahlkemper. And could they go into another 
feedstock?
    Mr. Gaesser. We would be back to an excess supply of 
soybean oil and it would have to be exported or it would just 
set in storage and that's just a detriment to the price of 
soybeans. It's one component that we always have. So when the 
value of soybean oil is low, it hurts the value of our soybeans 
that we sell to the processor.
    Chairwoman Dahlkemper. But can they convert to another 
feedstock or some other--
    Mr. Gaesser. The biodiesel industry?
    Chairwoman Dahlkemper. Or for some other use? That's what 
I'm asking, I guess.
    Mr. Gaesser. There's always the possibility, but it would 
probably require exports.
    Chairwoman Dahlkemper. Because one of the problems I 
understand now is the price of soybeans is so high and the 
price of gasoline is so low. T economics just aren't there.
    Mr. Gaesser. We're all in a Catch-22 on that. It's good for 
me.
    Chairwoman Dahlkemper. It's good for you.
    Mr. Gaesser. But it's not so good for biodiesel and that's 
the reason we need the bioenergy program to help through this 
shock that we have and to help through the disparity of values, 
I think.
    Chairwoman Dahlkemper. Part of the thing is that it's such 
a young industry and we're still trying to figure out what the 
balance of it is.
    Mr. Gaesser. That's the problem.
    Chairwoman Dahlkemper. I'm going to ask one final question 
and I'll just ask for each of you to give me a quick answer. If 
there's one thing you would like to see Congress do right now 
to help this industry, save it, help it to grow, move forward, 
what would that one thing do?
    We'll start with Mr. Noble.
    Mr. Noble. Well, to simplify it all, I would just look for 
a two percent mandate across the board, federally.
    Chairwoman Dahlkemper. Thank you.
    Mr. Wootton. I agree with that. The RFS2 kind of does that 
in the sense. Pennsylvania has implemented a B2.
    Chairwoman Dahlkemper. Two percent. Are there four states 
right now? Pennsylvania is the fourth one.
    Mr. Wootton. There's three right now.
    Chairwoman Dahlkemper. Who are the other states? 
Pennsylvania just passed.
    Mr. Wootton. Pennsylvania, Minnesota, and Washington.
    Chairwoman Dahlkemper. Massachusetts, okay. So you would 
agree with that, Mr. Wootton?
    Mr. Wootton. Yes.
    Mr. Bafalis. Of course, I'd like a mandate, but what you 
could do now is to get the RSW out without the indirect land 
use. That would get the market opened up.
    Mr. Gaesser. I would have to agree with the indirect land 
use issue, but also the extension of the tax credit is really 
important too.
    Mr. Duvall. Expansion of the definition of forest biomass 
would be most beneficial to our state.
    Chairwoman Dahlkemper. Dr. Das?
    Mr. Das. I would agree with that and that we diversify the 
options of biodiesel crops.
    Chairwoman Dahlkemper. Thank you. I yield to Mr. 
Westmoreland.
    Mr. Westmoreland. Thank you, and just a couple of 
questions.
    Mr. Duvall, could you find out for us and submit it to the 
Committee for record if the American Farm Bureau was ever 
contacted about any of these rules that have been implemented.
    Mr. Duvall. We plan to. And I would say and I sat on the 
Board of Directors, American Farm Bureau, and I said they would 
love to be able to debate the issues around that with EPA.
    Mr. Westmoreland. And we may do that. We'll ask the 
chairlady to look into that.
    Mr. Bafalis, you made a point that I never really had 
thought about until you made it, in the fact that by pushing 
back this mandate or whatever it is costing you business and 
people not wanting to do that.
    Have you talked to anybody, has your industry made that 
known about this pushback and what it's--that they're kind of 
destroying the people that's trying to promote what we're 
trying to get going here?
    Mr. Bafalis. I don't know if I've talked to our association 
about it, but I think all of us know that the customers are 
waiting. Just by delaying it at all.
    Mr. Westmoreland. That's a big deal.
    Mr. Bafalis. It's huge.
    Mr. Westmoreland. That's a big deal and I would hope that 
you all have an association that you've gotten together with 
that you could let them know what kind of impact that that's 
having.
    The other thing I wanted to ask all of you, as far as the 
outlet for these biofuels, I know that you know if I go to the 
gas station sometimes on the pump it says this could contain up 
to 10 percent ethanol or whatever it is. What percentage could 
you go to in some of these products to--what would be the max?
    Mr. Wootton. You could actually go to 100 percent. The 
vehicle I drove in here today runs on 100 biodiesel.
    Mr. Westmoreland. So it runs on 100 percent biodiesel.
    Mr. Wootton. You can't without modifying your vehicle. The 
challenge with 100 percent in cold months is it will gel at 32 
degrees, so if you blend it down to a B2, B5, B10, B20 that 
we're talking about in public policy, you don't have a big 
adjustment on when the product starts to freeze.
    In reality, there's not enough feedstocks to get beyond a 
B20. Even a B10 and some people would argue. So what we're 
talking about is getting this product out there at small levels 
at B2, B5 blends, no modification to your vehicles, no 
modifications to your home heating system, no modification to 
your transportation system.
    Mr. Westmoreland. At what point do you have to have 
modifications, I guess?
    Mr. Wootton. You don't really.
    Mr. Westmoreland. You don't? You burn 100 percent?
    Mr. Wootton. I can burn it, as opposed to other products 
you have challenges with it. But in reality, you can't go, 
there's not a feedstock available whether you leave soybean in 
or not to get to these levels, yet. But as research continues, 
and we improve the yield of content of the bean or we find 
success in algae or camelina, trotrophal, all of these products 
are coming out. As you said, this is a new industry. We've got 
to do everything now to keep it going to get to these advances, 
as opposed to trying to do things to put barriers up and let it 
go away.
    Mr. Westmoreland. I don't have any further questions. I 
yield back the balance of my time.
    Chairwoman Dahlkemper. I thank the panel for coming today 
and for your testimony. It's certainly a very important 
industry, in our country going forward. I ask unanimous consent 
that Members will have five days to submit statements and 
supporting materials for the record. Without objection, so 
ordered. Thank you again to the panel. This hearing is now 
adjourned.
    [Whereupon at 1:05 p.m., the hearing was concluded.]

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