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



 
  HEARING TO REVIEW THE IMPACT OF THE INDIRECT LAND USE AND RENEWABLE
           BIOMASS PROVISIONS IN THE RENEWABLE FUEL STANDARD

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


                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON CONSERVATION, CREDIT,
                          ENERGY, AND RESEARCH

                                 OF THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 6, 2009

                               __________

                           Serial No. 111-13


          Printed for the use of the Committee on Agriculture
                         agriculture.house.gov


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                        COMMITTEE ON AGRICULTURE

                COLLIN C. PETERSON, Minnesota, Chairman

TIM HOLDEN, Pennsylvania,            FRANK D. LUCAS, Oklahoma, Ranking 
    Vice Chairman                    Minority Member
MIKE McINTYRE, North Carolina        BOB GOODLATTE, Virginia
LEONARD L. BOSWELL, Iowa             JERRY MORAN, Kansas
JOE BACA, California                 TIMOTHY V. JOHNSON, Illinois
DENNIS A. CARDOZA, California        SAM GRAVES, Missouri
DAVID SCOTT, Georgia                 MIKE ROGERS, Alabama
JIM MARSHALL, Georgia                STEVE KING, Iowa
STEPHANIE HERSETH SANDLIN, South     RANDY NEUGEBAUER, Texas
Dakota                               K. MICHAEL CONAWAY, Texas
HENRY CUELLAR, Texas                 JEFF FORTENBERRY, Nebraska
JIM COSTA, California                JEAN SCHMIDT, Ohio
BRAD ELLSWORTH, Indiana              ADRIAN SMITH, Nebraska
TIMOTHY J. WALZ, Minnesota           ROBERT E. LATTA, Ohio
STEVE KAGEN, Wisconsin               DAVID P. ROE, Tennessee
KURT SCHRADER, Oregon                BLAINE LUETKEMEYER, Missouri
DEBORAH L. HALVORSON, Illinois       GLENN THOMPSON, Pennsylvania
KATHLEEN A. DAHLKEMPER,              BILL CASSIDY, Louisiana
Pennsylvania                         CYNTHIA M. LUMMIS, Wyoming
ERIC J.J. MASSA, New York
BOBBY BRIGHT, Alabama
BETSY MARKEY, Colorado
FRANK KRATOVIL, Jr., Maryland
MARK H. SCHAUER, Michigan
LARRY KISSELL, North Carolina
JOHN A. BOCCIERI, Ohio
SCOTT MURPHY, New York
EARL POMEROY, North Dakota
TRAVIS W. CHILDERS, Mississippi
WALT MINNICK, Idaho

                                 ______

                           Professional Staff

Robert L. Larew, Chief of Staff      Nicole Scott, Minority Staff 
Andrew W. Baker, Chief Counsel       Director
April Slayton, Communications 
Director

                                  (ii)


                                 ______

       Subcommittee on Conservation, Credit, Energy, and Research

                   TIM HOLDEN, Pennsylvania, Chairman

STEPHANIE HERSETH SANDLIN, South     BOB GOODLATTE, Virginia, Ranking 
Dakota                               Minority Member
DEBORAH L. HALVORSON, Illinois       JERRY MORAN, Kansas
KATHLEEN A. DAHLKEMPER,              SAM GRAVES, Missouri
Pennsylvania                         MIKE ROGERS, Alabama
BETSY MARKEY, Colorado               STEVE KING, Iowa
MARK H. SCHAUER, Michigan            RANDY NEUGEBAUER, Texas
LARRY KISSELL, North Carolina        JEAN SCHMIDT, Ohio
JOHN A. BOCCIERI, Ohio               ADRIAN SMITH, Nebraska
MIKE McINTYRE, North Carolina        ROBERT E. LATTA, Ohio
JIM COSTA, California                BLAINE LUETKEMEYER, Missouri
BRAD ELLSWORTH, Indiana              GLENN THOMPSON, Pennsylvania
TIMOTHY J. WALZ, Minnesota           BILL CASSIDY, Louisiana
ERIC J.J. MASSA, New York
BOBBY BRIGHT, Alabama
FRANK KRATOVIL, Jr., Maryland
SCOTT MURPHY, New York
WALT MINNICK, Idaho
EARL POMEROY, North Dakota

               Nona Darrell, Subcommittee Staff Director

                                 (iii)


                             C O N T E N T S

                              ----------                              
                                                                   Page
Goodlatte, Hon. Bob, a Representative in Congress from Virginia, 
  opening statement..............................................     3
Herseth Sandlin, Hon. Stephanie, a Representative in Congress 
  from South Dakota, prepared statement..........................     5
Holden, Hon. Tim, a Representative in Congress from Pennsylvania, 
  opening statement..............................................     1
    Submitted material...........................................    98
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, opening statement...................................     4
    Prepared statement...........................................     4
Smith, Hon. Adrian, a Representative in Congress from Nebraska, 
  prepared statement.............................................     7

                               Witnesses

Glauber, Ph.D., Joseph, Chief Economist, U.S. Department of 
  Agriculture, Washington, D.C...................................     7
    Prepared statement...........................................     9
Oge, Margo T., Director, Office of Transportation and Air 
  Quality, Office of Air and Radiation, U.S. Environmental 
  Protection Agency, Washington, D.C.............................    17
    Prepared statement...........................................    18
Babcock, Ph.D., Bruce A., Professor of Economics and Director, 
  Center for Agricultural and Rural Development, Iowa State 
  University, Ames, IA...........................................    43
    Prepared statement...........................................    44
Coleman, R. Brooke, Executive Director, New Fuels Alliance, 
  Boston, MA.....................................................    46
    Prepared statement...........................................    48
Bowdish, Nick, General Manager, Platinum Ethanol, LLC, Arthur, IA    52
    Prepared statement...........................................    54
Feraci, Manning, Vice President of Federal Affairs, National 
  Biodiesel Board, Washington, D.C...............................    58
    Prepared statement...........................................    60
Pechart, Michael L., Deputy Secretary for Marketing and Economic 
  Development and Policy Director, Pennsylvania Department of 
  Agriculture, Harrisburg, PA....................................    65
    Prepared statement...........................................    67
Webster, Anitra B., Owner, Family Forest, Lynchburg, VA, 
  Lynchburg, VA; on behalf of American Forest Foundation.........    69
    Prepared statement...........................................    71

                           Submitted Material

American Soybean Association, submitted statement................    88
Biotechnology Industry Organization, submitted statement.........    91
Flederbach, Jr., William E., Executive Vice President, ClimeCo; 
  on behalf of PetroAlgae, submitted statement...................    84
Griesing, Dennis, Vice President, Government Affairs, Soap and 
  Detergent Association, submitted statement.....................    87
Hoeven III, Hon. John H., Governor, State of North Dakota; 
  Chairman, Governors' Biofuels Coalition; and Hon. Chester J. 
  ``Chet'' Culver, Governor, State of Iowa; Vice Chairman, 
  Governors' Biofuels Coalition, submitted joint statement.......    83
National Alliance of Forest Owners, submitted statement..........    96
Society of American Foresters, submitted statement...............    95
Submitted questions..............................................   372


  HEARING TO REVIEW THE IMPACT OF THE INDIRECT LAND USE AND RENEWABLE

           BIOMASS PROVISIONS IN THE RENEWABLE FUEL STANDARD

                              ----------                              


                         WEDNESDAY, MAY 6, 2009

                  House of Representatives,
 Subcommittee on Conservation, Credit, Energy, and 
                                          Research,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 11:10 a.m., in 
Room 1300 of the Longworth House Office Building, Hon. Tim 
Holden [Chairman of the Subcommittee] presiding.
    Members present: Representatives Holden, Herseth Sandlin, 
Halvorson, Dahlkemper, Markey, Schauer, Kissell, Boccieri, 
Massa, Bright, Kratovil, Minnick, Peterson (ex officio), 
Goodlatte, Moran, King, Schmidt, Smith, Latta, Luetkemeyer, 
Thompson, Cassidy, and Pomeroy.
    Staff present: Nona Darrell, Adam Durand, Craig Jagger, 
Tyler Jameson, Robert L. Larew, Anne Simmons, Cherie Slayton, 
Rebekah Solem, Kristin Sosanie, Patricia Barr, Brent Blevins, 
Tamara Hinton, Josh Maxwell, and Jamie Mitchell.

   OPENING STATEMENT OF HON. TIM HOLDEN, A REPRESENTATIVE IN 
                   CONGRESS FROM PENNSYLVANIA

    The Chairman. This hearing of the Subcommittee on 
Conservation, Credit, Energy, and Research to review the impact 
of the indirect land use and renewable biomass provisions in 
the Renewable Fuel Standards will come to order.
    I would like to welcome our witnesses to today's hearing. 
In this hearing we hope to examine the impact of indirect land 
use and renewable biomass provisions in the Renewable Fuel 
Standard. As our economy continues to change, we will rely more 
and more on biofuels. Farmers can be at the forefront of this 
revolution by using the commodities they grow, and even the 
waste, that they now have to find ways to discard in innovative 
new ways to produce transportation fuels. Linking agriculture 
and renewable fuels is important to diversify our energy 
market, protect our environment, and revitalize rural America.
    I am pleased to be from a state that is leading efforts to 
lessen our nation's dependency on imported oil. Pennsylvania is 
at the forefront of promoting renewable energy and will 
continue to be at this helm, but only if its feedstock 
potential is eligible for use under the new Renewable Fuel 
Standard.
    One concern in the new Renewable Fuel Standard as put 
forward in the Energy Independence Act and Security Act of 
2007, is how lifecycle greenhouse gas emissions will be defined 
and regulated. The law calls for the total amount of greenhouse 
gas emissions, including direct and indirect emission sources, 
to be counted. But how do we define indirect emissions from 
land use changes. Indirect land use changes are not a case of, 
``we know it when we see it.'' We must use models to forecast 
what may occur and have to make assumptions that may not be 
correct. How do we ensure accuracy? How far do we go? How do we 
calculate an assumed ripple effect?
    I would like to include in the record letters from a wide 
range of respected researchers, scientists, and economists and 
industry groups that oppose the supposed science behind the 
indirect land use changes and realize that they are something 
we cannot measure or quantify. And I would like the Ranking 
Member and the Chairman of the full Committee and other Members 
present just to look at the size of the comments we have 
received so far.
    [The information referred to is located on p. 98:]
    The Chairman. When the science is so uncertain requiring 
inclusion of indirect land use changes, it is really not the 
proper way to address international policy decisions on how to 
stop the clearing of the Amazon Rainforest.
    Furthermore, the definition of renewable biomass contained 
in H.R. 6 is problematic because it could exclude a majority of 
the country's woody biomass. The definition would exclude much 
forestland because it was not clear cut and then replanted. 
Hardwood forestland in my home State of Pennsylvania, and much 
of the Northeast, as well as several other regions of the 
country, could be an important component in meeting the new 
Renewable Fuel Standard, but would be excluded by this 
definition.
    Pennsylvania also has hundreds of thousands of acres of 
abandoned mine lands. These lands can be restored and planted 
with conserving grasses such as switchgrass, which could be 
used for cellulosic biofuel. Being able to use the abandoned 
mine land for growing feedstocks would create an economic 
incentive to restore the desolate landscape which now relies on 
inadequate Federal and state funds. But, under the new 
Renewable Fuel Standard the statute requires land to have been 
previously cultivated.
    If we continue with these provisions in H.R. 6, we will 
shortchange a large part of the country before we even get 
started. It is the statute which was not created through 
regular order that is a problem, and it needs to be changed to 
allow for a greater flexibility. We need to expand the reach of 
biofuels, not hamper the farmer and forest owner. We need to 
increase biofuels production, not restrict our energy 
independence.
    I am extremely interested in hearing what our witnesses say 
today. I hope we can then move forward to ensure agriculture's 
continued role in producing renewable fuels and reducing 
America's dependence on imported oil.
    I thank our witnesses for being here today.
    I now recognize the Ranking Member of the Subcommittee, the 
gentleman from Virginia, Mr. Goodlatte.

 OPENING STATEMENT OF HON. BOB GOODLATTE, A REPRESENTATIVE IN 
                     CONGRESS FROM VIRGINIA

    Mr. Goodlatte. Well, thank you, Mr. Chairman, and you will 
find from my remarks that we are in considerable agreement 
about the state of affairs. I very much appreciate you holding 
his hearing today to review the impact of the indirect land use 
and renewable biomass provisions in the Renewable Fuel 
Standard.
    The Energy Independence and Security Act of 2007, 
dramatically increased the RFS to 36 billion gallons by 2022. 
The expanded RFS also created an unrealistic mandate for 
conventional corn ethanol by prohibiting the use of feedstock 
from new crop acres. This restriction will make it difficult, 
if not impossible, for producers to meet the food and fiber 
demands of our consumers, while also meeting the mandate set in 
the RFS.
    We also face a major problem in the transition from grain-
based fuels to cellulosic biofuels because the Act restricts 
the cellulosic feedstocks from forests and agriculture lands 
that can be used to meet the RFS. Virginia has been in the 
business of agriculture for over 400 years. Much of the 
uncropped land in the 6th District has the potential to grow 
switchgrass and help meet the demands of cellulosic ethanol, if 
and when it becomes commercially available. However, the 
unnecessary land restrictions in the RFS will limit potential 
biomass to be used to meet the mandate.
    The Act also discourages the production of cellulosic fuels 
from forests, one of the largest potential sources of 
cellulosic feedstock. The renewable biomass definition in EISA 
limits my home State of Virginia to 2 million acres of eligible 
forestland to meet the RFS compared to 15 million acres if we 
use the biomass definition in the 2008 Farm Bill.
    The use of forest biomass for biofuels creates markets for 
byproducts of forest improvement projects. This can help solve 
our nation's energy, forest health, and wildfire problems and 
also help forest owners stay on the land. I am supportive of 
the development of renewable fuels, but more importantly, I am 
in favor of developing a policy that is technology-neutral and 
allows the market to develop new sources of renewable energy.
    It has been over 2 years since the passage of the 2007 
Energy Bill. Yesterday the EPA released the long-awaited 
proposed regulations for the expanded RFS. I wish I had had 
more time to review the 600 pages before today's hearing, 
however, I look forward to reviewing EPA's proposal, as I am 
sure many people are curious on how they determine their model 
for lifecycle greenhouse gas emissions and how indirect land 
change was involved.
    I would also like to welcome all our witnesses for their 
testimony today. I am particularly pleased to welcome Ms. 
Anitra Webster, a tree farmer from Lynchburg, Virginia, with 
more than 20 years of experience in the field of forestry. Ms. 
Webster is a constituent of mine who brings a unique point of 
view to today's hearing as someone who owns a family tree farm. 
Ms. Webster understands the implications of the current 
definition of biomass in the Renewable Fuel Standard, and I 
look forward to hearing her testimony.
    Mr. Chairman, thank you very much.
    The Chairman. The chair thanks the gentleman and recognizes 
the Chairman of the full Committee, Mr. Peterson.

OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE 
                   IN CONGRESS FROM MINNESOTA

    Mr. Peterson. Thank you, Mr. Chairman. I thank the Ranking 
Member for your leadership. I have a statement I would like 
made part of the record, but I just have to say that we have 
been going back and forth on this stuff since this energy bill 
passed. I no longer have any confidence--and I shouldn't be 
going after you folks--that you people have any idea what is 
going on here. You are going to kill off the biofuels industry 
before it ever gets started, and you are in bed with the oil 
companies. You know, why would you put indirect costs on corn 
and soybeans and not put it on oil? What about all the indirect 
costs of protecting the oil shipping lanes in the Middle East? 
You know, that is not counted.
    I mean, this is ridiculous what is going on here. You know, 
this stuff gets put in in the middle of the night, and over our 
objections. We have been trying to fix this for 2 years. I go 
down and meet with people. Nothing happens. We are off on some 
peer review. Why aren't we peer reviewing all these other 
things? Why are we picked out? Because people don't like corn 
ethanol.
    Well, I will tell you something. You kill off corn ethanol, 
which is what you are going to do here, and what I am upset 
about is not so much what we are talking about today but the 
interaction of this with the climate change bill and what is 
going on over there. I am at the point where I don't even want 
to ask anybody any questions, because you are putting us into a 
position to talk about something we shouldn't even be talking 
about.
    So I just want this message to be sent back down the Hill 
or down the street, that the way this thing is going on I am 
off the train. I will not support any kind of climate change 
bill. I don't care. Even if you fix this, because I don't trust 
anybody anymore. Okay? And I have had it.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Peterson follows:]

  Prepared Statement of Hon. Collin C. Peterson, a Representative in 
                        Congress from Minnesota
    I thank the Chairman and the Ranking Member for their leadership on 
this issue.
    More than 2 decades ago, when I would talk about renewable fuels, 
people thought I was nuts. Now ethanol is blended into all American 
gasoline to help it burn cleaner, and renewable fuels provide an 
unparalleled opportunity to create new jobs, decrease pollution and 
revitalize rural America--as long as Congress doesn't mess it up along 
the way.
    Unfortunately, two provisions in the expanded Renewable Fuel 
Standard have the potential to do just that. That's what we're here to 
talk about today.
    In the proposed rule that the EPA released yesterday, some biofuels 
are greatly penalized by the calculations on lifecycle greenhouse gas 
emissions that take into account indirect changes in international land 
use that may not even take place. The expanded RFS requires that all 
biofuels produced from facilities built after the enactment of the EISA 
achieve a reduction in lifecycle greenhouse gas emissions. The EPA 
calculates the lifecycle emissions of each fuel, relative to the 
gasoline or diesel fuel it would replace, and includes emissions from 
all stages of fuel production. Biofuels are uniquely charged with 
emissions from indirect sources, gasoline is not.
    But the simple fact is that a great deal of uncertainty remains 
when we try to measure indirect effects. This isn't about pitting folks 
against one another. It's about making sure that in our efforts to 
increase America's energy independence, we don't do more harm than 
good. We've got some big policy decisions to make, and we've got to 
make sure we're asking the tough questions and receiving reliable 
information.
    The EPA has promised to carry out a peer review process, and I 
wonder whether or not these reviews will be looking at more than just 
the numbers. It is my hope that in addition to reviewing whether EPA is 
using the best available models, that the experts will also review 
whether the best available models are good enough to be used in making 
these very important decisions. Modeling indirect land use is an 
extremely complex exercise with much room for error. And when several 
different models, from different groups of economists, are put 
together, errors can be compounded.
    Our economic experts must be asked to weigh in on whether they have 
confidence that the results coming out of these models are reasonable 
representations of real-world impacts. It's been said many times in the 
course of this discussion that regulations need to be based on sound 
science, so let's not forget that economics is a science as well, and 
ensure that economists' concerns over accuracy and proper use of their 
work are not pushed aside.
    The second provision of concern to those in American agriculture is 
the definition of renewable biomass. The definition excludes the 
cellulosic or woody biomass available in a majority of the country and 
includes stipulations that the land must be either ``actively managed'' 
or ``fallowed'', in addition to being ``non-forested'' for cropland. If 
we continue with this definition, Congress would be shortchanging a 
huge part of the country before we even get started, and hamper our 
efforts to meet the goals the President has laid out.
    On both issues, we need to know more as we move forward and we need 
to make sure that we are not going to create new problems for renewable 
fuels as we continue on the road to a cleaner environment and energy 
independence.
    I thank the Chairman for calling today's hearing and look forward 
to hearing the witnesses' testimony.

    The Chairman. The chair thanks the Chairman for his 
remarks, and there is not much to say to follow up on that 
other than there are a lot of people off the train. They need a 
new conductor here, so we need to negotiate, and we have a lot 
of problems.
    Mr. Peterson. Mr. Chairman, I don't think we can negotiate.
    The Chairman. I didn't even mean that, sir.
    Mr. Peterson. Because the people we are dealing with here, 
I don't think we can negotiate with. You know, I don't have any 
confidence. I mean, the only way I would consider supporting 
any kind of climate change bill, if it was ironclad that these 
agencies had no ability to do any rulemaking of any kind 
whatsoever. We had everything dotted and crossed, the T's 
crossed, and we could be absolutely guaranteed that these folks 
would not get involved. And I am not sure if that is possible, 
but if that could be done and if they could make me confident, 
then maybe we could talk about it. But, I am not in any mood 
for negotiating with anybody at this point.
    The Chairman. Thank you, Mr. Chairman. I thought I was off 
the train first. The Chairman requests that other Members 
submit their opening statements for the record.
    [The prepared statements of Ms. Herseth Sandlin and Mr. 
Smith follow:]

Prepared Statement of Hon. Stephanie Herseth Sandlin, a Representative 
                     in Congress from South Dakota
    Thank you Mr. Chairman for your leadership on these issues. Mr. 
Glauber and Ms. Oge, welcome.
    If you look at my State of South Dakota from end-to-end, whether it 
is our vast fields of corn and soybeans in the eastern part of the 
state, the abundant wind resources across the state, or the great 
forests of the Black Hills in the West, South Dakota embodies the idea 
that we need a diversified approach to our national energy policy--and 
in particular we need to take advantage of new opportunities for 
renewable energy.
    So, as we strive to meet our national energy needs, we must 
continue to recognize that rural America, including my State of South 
Dakota, has much to offer. Rural states should be at the center of the 
solution as our national energy policy shifts and adjusts in ways that 
enhance our national and economic security; that promote both 
innovation and conservation; and that ultimately will ease the strain 
on families' and business owners' budgets.
    With the passage of the original Renewable Fuel Standard in 2005 
and the aggressive increase included in last year's energy bill, we 
have already taken initial key steps in the right direction, as we seek 
to take advantage of the contribution agricultural producers in rural 
states can make to reduce our dependence on foreign oil and overall 
carbon emissions through an increase in the production of biofuels, 
wind, and other types of renewable energy.
    It's vitally important for economic development in rural states 
like South Dakota, and for achieving our nation's goal of energy 
independence, that the EPA correctly implement the Renewable Fuel 
Standard. The new Renewable Fuel Standard approved in 2007 was an 
important step in recognizing the important role that ethanol, 
biodiesel and other clean-burning, domestic biofuels will play in 
reaching these goals. While I'm still reviewing the proposed rule, it's 
clear that there are both good and bad takeaways. The rule does clearly 
show what many of us have said for quite some time--when direct 
emissions are compared to gasoline, ethanol burns far more cleanly. On 
the other hand, I have serious questions and concerns about the rule's 
findings on so-called indirect land use changes in other countries that 
some are attributing to biofuels production. I believe that on this 
issue the proposed rule is simply the beginning of the real debate.
    I will push to ensure that no speculative indirect land use changes 
are included in a final rule, and that the final rule fairly recognizes 
the innovations of U.S. agricultural producers and biofuels producers. 
This is a key issue in the implementation of the RFS because, as Ms. 
Oge notes in her written testimony, under EPA's newly proposed rule, 
indirect emissions ``comprise a significant portion of the total 
lifecycle emissions of biofuels.''
    I'd also like to touch quickly on the issue of renewable biomass. 
The EPA was required to promulgate rules for the use of renewable 
biomass under the RFS. As many of my colleagues here today know, I have 
introduced bipartisan legislation to improve the flawed definition of 
renewable biomass that was slipped into the RFS at the eleventh hour.
    In January, the Energy Information Administration projected that 
``available quantities of cellulosic biofuels will be insufficient to 
meet the new RFS targets for cellulosic biofuels before 2022, 
triggering both waivers and a modification of applicable volumes . . . 
.''
    I believe a key to preventing this shortfall is to ensure 
cellulosic biofuels can be produced from the greatest possible 
diversity of renewable feedstocks in communities across the nation. 
This particularly affects any region of the country with significant 
tracts of forestland, including the Midwest, Northwest, Northeast and 
South.
    The RFS definition of qualifying ``renewable biomass'' is flawed 
because:

   It excludes from the mandate almost all biofuels that use 
        federally sourced biomass as a feedstock, thereby discouraging 
        and disincentivizing their use in biofuels production,

   It also excludes all biofuels made from privately sourced 
        biomass, unless it comes from trees that are ``planted'' in a 
        ``plantation'' and ``actively managed.'' This excludes a large 
        percentage of woody biomass on private land from being used in 
        biofuels production, and

   It inhibits sound forest management which is critical as 
        forest managers work to improve the health of our forests and 
        reduce the risk of catastrophic wildfire.

    I am very pleased indeed to have strong bipartisan support for this 
legislation from Members representing districts that are geographically 
diverse, including Chairman Peterson.
    Mr. Chairman, thank you again for focusing the Subcommittee on 
these issues of vital importance to South Dakota and other rural 
states.
                                 ______
                                 
 Prepared Statement of Hon. Adrian Smith, a Representative in Congress 
                             from Nebraska
    Thank you, Mr. Chairman.
    Through the Energy Independence and Security Act of 2007, Congress 
charged the Environmental Protection Agency (EPA) with evaluating the 
``carbon footprint'' of biofuels in order to meet Renewable Fuel 
Standard (RFS) requirements set forth in this statute. Under the EPA's 
recently proposed rule, biofuels such as cellulosic ethanol, biodiesel, 
and corn-based ethanol, which would otherwise have no difficulty 
meeting these greenhouse gas reduction requirements, could be targeted 
due to the estimated impact of indirect land use changes.
    Currently, there are no widely accepted methodologies or models for 
calculating indirect land use changes resulting from increased biofuel 
production. The premature use of inaccurate or incomplete data could 
cause severe harm to the U.S. biofuels industry and potentially 
disqualify sustainable feedstock from being utilized. My home State of 
Nebraska has more than 45 million acres of farmland. It is simply not 
practical to draw broad conclusions across a large geographic region 
concerning the effects of particular land use changes on resulting 
greenhouse gas emissions. Different greenhouse gas emissions are caused 
by variations in soil, local climate, and different farming practices. 
The study of the environmental impact of agriculture operations is a 
comparatively new science, and should not undermine years of renewable 
energy research.
    Again, thank you, Mr. Chairman. I appreciate the Subcommittee 
holding this hearing and look forward to discussing and reviewing this 
proposal in a bipartisan, productive manner.

    The Chairman. I would like to call up our first panel of 
witnesses today. Dr. Joe Glauber, Chief Economist for U.S. 
Department of Agriculture, Ms. Margo Oge, Director, Office of 
Transportation and Air Quality, U.S. Environmental Protection 
Agency.
    Dr. Glauber, you may proceed when ready.

   STATEMENT OF JOSEPH GLAUBER, Ph.D., CHIEF ECONOMIST, U.S. 
          DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C.

    Dr. Glauber. Thanks very much, Mr. Chairman. I would like 
to thank you and the Members of the Subcommittee for the 
opportunity to discuss in the indirect land use provisions that 
are part of the Energy Security and Independence Act of 2007.
    In my written testimony I discuss how biofuel production 
affects land use in the United States and the rest of the 
world, and discuss what is meant by emissions associated with 
land use change. I present findings from various studies on 
greenhouse gas emissions from renewable fuels and discuss some 
of the key uncertainties noted in these research efforts in 
estimating the land effects of land use change on greenhouse 
gas emissions.
    Literature on biofuel production in international land use 
has developed largely over the past 5 years. Most of the focus 
has been on the effect of biofuel production in U.S. 
agriculture, however, several more recent studies attempt to 
also model the ripple effects that would occur in agricultural 
markets around the world due to increased biofuel use within 
the U.S., and the implications this might have on greenhouse 
gas emissions.
    There is little question that increased biofuel production 
has had and will have effects on land use in the U.S. and the 
rest of the world. The more interesting question concerns 
magnitude. To the degree to which the supply response to 
increased biofuel production is met through increased yields, 
cropland expansion will be less. Land use change is more likely 
to occur where producers are more responsive to price changes.
    How much pasture and forest is converted to cropland will 
ultimately depend on the region, national, and local land use 
policies, and the degree to which competing uses such as 
grazing and forest products impose constraints for expansion. 
While economic modelers have a long history of policy analysis 
in agriculture, most of the analyses have focused on the impact 
of various domestic or international trade policies, for 
example, farm bills, trade agreements, on cropland.
    By contrast, the empirical literature on land use and 
greenhouse gas emissions is relatively young, with most studies 
appearing in the last 2 to 3 years. Sensitivity analysis 
suggests wide variation in results. In particular, much is to 
be learned about land conversion from forest to pasture and 
from pasture to cropland.
    Modeling the change in land use resulting from the 
expansion and the production of cornstarch-based ethanol 
requires making projections about future values of parameters 
that obviously cannot be known with certainty. Therefore, 
judgments and assumptions must be made as to the likely values 
these uncertain data will take. Each assumption, whether made 
explicitly or implicitly in the structure and data of the 
model, will influence the outcome.
    For example, two widely respected economic models estimate 
very different land requirements with respect to expanding 
ethanol production, and some of this I go into in my written 
testimony. These differences in land requirements shape the 
greenhouse gas profile associated with ethanol. In my written 
testimony I discuss some of the major assumptions that 
influence the estimate of greenhouse gas emissions from 
cornstarch-based ethanol and other biofuels.
    Some of the more critical factors: assumption on yield 
growth. Most models assume some trend yield growth due to 
technological change, but how sensitive are yields to price 
changes? Should we expect yields to increase if prices are 
higher? Increased yields means smaller increases in total crop 
acres due to increased ethanol production.
    Responsiveness to changes in prices: If world corn and 
soybean prices increase, where are we more likely to seek 
increases in plantings? Where is cropland conversion more 
likely to take place? The greenhouse gas emissions conversion 
of forest to cropland are far larger than emissions from 
pasture to cropland.
    Substitutability of distiller dry grains: DDGs are an 
important byproduct of ethanol production. The more DDGs 
replace corn and soybean meal in feed rations, the smaller 
potential impact of ethanol production on feed prices, and 
enhanced land use change.
    And accounting for future greenhouse gas emissions: 
Generally when comparing greenhouse emissions of renewable 
fuels to non-renewable alternatives, studies assume increases 
in greenhouse gas from land use occur in the conversion, while 
reductions in greenhouse gas emissions due to the production 
and use of renewable fuels occur over several years into the 
future. Increasing the expected timeframe for renewable fuel 
production on converted lands reduces their net greenhouse gas 
emissions.
    Last, Mr. Chairman, let me say that USDA has had a 
constructive and cooperative relationship with EPA as they have 
developed their renewable fuel proposal. Their proposal raises 
challenging issues for public comment and will do much to 
advance the understanding of the lifecycle greenhouse gas 
emissions impact of biofuels, and in particular, the land use 
change impacts. USDA looks forward to continuing our 
relationship with EPA as they complete the work necessary to 
finalize the RFS rule.
    Mr. Chairman, that concludes my statement.
    [The prepared statement of Dr. Glauber follows:]

  Prepared Statement of Joseph Glauber, Ph.D., Chief Economist, U.S. 
              Department of Agriculture, Washington, D.C.
    Mr. Chairman, Members of the Subcommittee, thank you for the 
opportunity to discuss the indirect land use provisions that are part 
of the Energy Security and Independence Act of 2007 (EISA). Renewable 
fuels produced from renewable biomass feedstocks are defined in terms 
of their impact on lifecycle greenhouse gas (GHG) emissions. EISA 
further defined lifecycle GHG emissions to mean ``the aggregate 
quantity of GHG emissions (including direct emissions and significant 
indirect emissions such as significant emissions from land use 
changes), as determined by the Administrator of the EPA, related to the 
full fuel lifecycle, including all stages of fuel and feedstock 
production and distribution, from feedstock generation or extraction 
through the distribution and delivery and use of the finished fuel to 
the ultimate consumer, where the mass values for all greenhouse gases 
are adjusted to account for their relative global warming potential.''
    The feedstock limitations associated with the exclusion of some 
sources of renewable biomass as defined in EISA--particularly with 
respect to cellulosic materials from both private and public 
forestlands--may serve to limit the opportunity to replace fossil 
fuels. In the future, ethanol produced from cellulosic sources, 
including wood biomass, has the potential to cut lifecycle GHG 
emissions by up to 86 percent relative to gasoline (Wang et al. 2007).
    Yesterday, the Administrator of the Environmental Protection Agency 
(EPA) signed a notice of proposed rulemaking for the Renewable Fuel 
Standard (RFS) included in the EISA. EPA's proposal reflects 
considerable input, guidance, and data from USDA. EPA's proposal also 
utilized many of the same data and assumptions that USDA uses regularly 
in near-term forecasting agricultural product supply, demand, and 
pricing. They further acknowledge the uncertainty associated with the 
various models and input assumptions involved in their lifecycle 
modeling, present a number of different sensitivity analyses, and seek 
comment on what, if any changes should be made for the final rule.
    While the effects of biofuel production on GHG emissions are 
expected to increase land under cultivation, existing estimates of the 
magnitude due to land use conversion vary. Work such as that published 
in Science by Searchinger et al. (2008) concluded that if GHG emissions 
from indirect land use changes were taken into account, GHG emissions 
from biofuel production were potentially far larger than previously 
estimated. On April 23, 2009, the California Air Resources Board 
adopted a regulation that would implement a Low Carbon Fuel Standard 
(LCFS) for the reduction of GHG emissions from California's 
transportation fuels by ten percent by 2020. The LCFS would take into 
account the GHG emissions of indirect land use from biofuel production, 
potentially resulting in the exclusion of corn-based ethanol produced 
in the Midwest from California fuel markets.
    Today, I would like to discuss how biofuel production affects land 
use in the United States and the rest of the world, and will discuss 
what is meant by emissions associated with land use change. I will 
defer to EPA to describe the results of their most recent research, but 
will present some various other research on GHG emissions from 
renewable fuels and discuss some of the key uncertainties noted in 
these research efforts in estimating the effects of land use change on 
GHG emissions.
Historic Trends in U.S. Agricultural Land Use and Biofuel Production
    Before getting into each of these issues, I would like to present 
some context for this discussion by presenting a brief overview of the 
historic trends in U.S. biofuel production and agricultural land use in 
the United States and the rest of the world. Figure 1 shows the growth 
in corn and other starch based ethanol in the United States since 1992 
as well as the forecasted growth in corn and other starch based ethanol 
to 2030 based on the latest long-term forecast from the Energy 
Information Administration (EIA). The chart shows that EIA forecasts 
much of the growth in corn and other starch based ethanol will occur in 
the next couple of years and then stabilize at about 15 billion gallons 
per year into the future. The EIA projection of a plateau of 15 billion 
gallons of corn and other starch based ethanol reflects the limits 
placed on the volume of non-advanced ethanol that may qualify for 
credits under the RFS in the EISA, mandated minimum levels of 
cellulosic-based ethanol under RFS, and projected improvements in the 
profitability of cellulosic-based ethanol.
    In 2008/09, corn use for ethanol production is projected to be 3.7 
billion bushels and account for about 31 percent of total corn use in 
the United States (figure 2). By 2015/16, assuming current baseline 
assumptions remain constant, corn use for ethanol is expected to exceed 
4.8 billion bushels, about 34 percent of total corn use in the United 
States. Corn production in the United States is expected to increase 
from 12.1 billion bushels in 2008 to 14.0 billion bushels in 2015, an 
increase of 15.7 percent. Corn plantings are expected to increase from 
86 million acres to 90 million acres, up 4.7 percent, while yields are 
anticipated to increase by almost ten percent, from 154 bushels per 
acre in 2008 to 169 bushels per acre in 2015.
[GRAPHIC] [TIFF OMITTED] 51922.001

[GRAPHIC] [TIFF OMITTED] 51922.002

    What is the potential for expansion of cropland in the United 
States? Cropland use in the United States has varied considerably over 
the past 30 years. Figure 3 shows planted acreage to the eight row 
crops (wheat, corn, barley, grain sorghum, oats, soybeans, rice and 
cotton) since 1975. Over 297 million acres were planted to these crops 
in 1981. Plantings fell off to less than 245 million acres in the late 
1980s and generally remained between 245 to 255 million acres during 
the early 1990s as land was idled. The annual Acreage Reduction 
Programs authorized by the 1981, 1985 and 1990 Farm Bills, and 
Conservation Reserve Program (CRP) starting under the 1985 Farm Bill 
contributed significantly to this acreage reduction. Planted acres to 
the eight principal crops rose to almost 261 million acres in 1996, 
however, as grain prices spiked.
    From 1996 to 2006, plantings to the eight row crops generally 
trended downward due to lower commodity prices, increased planting 
flexibility offered by the 1996 and subsequent farm bills which allowed 
producers to fallow land that had formerly been maintained in more 
permanent cultivation, and expansion of minor crops such as canola. 
With the return of higher prices in 2007, however, plantings to the 
eight row crops rose again, reaching 253 million acres last year. Based 
on producer planting intentions, NASS estimates that 246 million acres 
will be planted to the eight row crops in 2009.
[GRAPHIC] [TIFF OMITTED] 51922.003


             Table 1--U.S. Planted Acreage in 1996 and 2008
                             (million acres)
------------------------------------------------------------------------
                                                             Change from
               Crop                    1996         2008       1996 to
                                                                 2008
------------------------------------------------------------------------
Wheat                                     75.1         63.1        ^12.0
Corn                                      79.2         86.0          6.8
Other feed grains                         24.8         15.7         ^9.1
Soybeans                                  64.2         75.7         11.5
Rice and cotton                           17.5         12.5         ^5.0
  8 row crops                            260.8        253.0         ^7.8
Hay\1\                                    61.2         60.1         ^1.1
Other crops                               11.7         10.9         ^0.8
Principal crops                          333.7        324.0         ^9.7
CRP                                       34.5         34.5          0.0
Principal crops plus CRP                 368.2        358.5         ^9.7
------------------------------------------------------------------------
\1\ Harvested acreage.

    Table 1 compares plantings in 1996 to plantings in 2008. Even 
though acreage enrolled in the CRP was unchanged between 1996 and 2008, 
total acreage planted to the eight row crops in 2008 was down nearly 8 
million acres (about three percent) and acreage planted to principal 
crops was down almost 10 million acres from 1996 levels. Corn and 
soybean acreage were up by over 18 million acres in 2008 compared with 
1996; however, this was more than offset by declines in wheat, small 
feed grains and cotton acreage. Thus, while it is clear that producers 
planted substantially more acreage as recently as 1996, most of the 
implied capacity is likely in areas more suitable for wheat and small 
grain production.
Estimated Land Use Effects of Biofuel Production
    The literature on biofuel production and international land use has 
developed largely over the past 5 years. Most of the focus has been on 
the effects of biofuel production on U.S. agriculture (see, for 
example, USDA, ERS/Office of the Chief Economist 2007; FAPRI 2008; 
Biomass Research and Development Board 2008; de Gorter and Just 2009). 
However, several more recent studies attempt to also model the ripple 
effects that would occur in agricultural markets around the world due 
to increased biofuel use within the U.S., and the implications this 
might have on GHG emissions. Table 2 presents the results from several 
recent modeling efforts that estimate the effects of ethanol production 
on global land use. These studies attempt to quantify the market 
response in the United States and in other countries to increases in 
commodity prices due to increases in biofuel production. These studies 
also quantify the GHG emissions from these market responses and 
attribute these emissions to biofuel production. The table is not meant 
to be comprehensive, but shows a selected range of central estimates. 
Other models, such as MIT's Emissions Prediction and Policy Analysis 
model, have also been used to examine indirect land use change impacts 
(Gurgel et al. 2007; Melillo et al. 2009). Key uncertainties are 
discussed below.
    One of the first studies of the effects of biofuels on GHG 
emissions was published by Searchinger et al., in the February 2008 
issue of Science. That study used a worldwide agricultural model to 
estimate emissions from land-use change, and reached the conclusion 
that corn-based ethanol nearly doubles greenhouse emissions over 30 
years, and increases greenhouse gases for 167 years. In contrast, when 
emissions from land use change were not included in their model, corn-
starch based ethanol reduced GHG emissions by 20 percent compared to 
gasoline. Using the multi-market, multi-commodity international FAPRI 
(Food and Agricultural Policy Research Institute) model, Searchinger et 
al. assessed the land use change and GHG implications of increasing 
corn ethanol production in the United States by 14.8 billion gallons 
and found that an additional 26.7 million acres of land would be 
brought into crop production world-wide (1.8 million acres per billion 
gallons of ethanol). In terms of GHG emissions per unit of energy 
produced, Searchinger et al. estimated that the emissions from land use 
change alone (104 grams of CO2 equivalent per MJ of energy 
in fuel) outweighed the emissions from gasoline (92 g CO2-
eq/MJ).
    Using the 2007 FAPRI baseline, Fabiosa et al. (2009) estimated that 
a one percent increase in U.S. ethanol use would result in a 0.009 
percent increase in world crop area. Most of the increase in world crop 
area is through an increase in world corn area. Brazil and South Africa 
respond the most, with multipliers of 0.031 and 0.042, respectively. 
Fabiosa et al. did not estimate the GHG implications of the lower land 
requirement.
    Based on the 10 year averages of U.S. ethanol use and world crop 
area taken from the 2007 FAPRI international baseline, and using the 
world area impact multiplier from Fabiosa et al. (0.009), the results 
suggest an impact multiplier of 1.64 million acres per 1 billion 
gallons of additional ethanol use, which is lower than the acreage 
effect estimated in the Searchinger study.
    The California Air Resources Board (CARB), as part of their recent 
proposed low carbon fuel standard, also estimated the GHG emissions 
associated with renewable fuels. CARB employed the Global Trade and 
Analysis Project (GTAP) model and also found significantly less land is 
required to produce ethanol than Searchinger et al. In the CARB study, 
each additional billion gallons of corn-starch based ethanol requires 
only 726,000 acres; about 60 percent less compared to Searchinger et 
al. Primarily as a result of this reduced acreage, CARB estimated the 
GHG emissions associated with land use change were 70 percent less than 
those estimated by Searchinger et al. The GHG emissions due to land use 
change were reduced from 104 grams of CO2 equivalent per MJ 
of ethanol to 30 grams of CO2 equivalent per MJ of ethanol.
    A more recent article by Tyner et al. (2009), which like the CARB 
study, employed the GTAP modeling framework, differentiated between 
various levels of ethanol production. Their results show smaller GHG 
emissions impacts from corn-starch based ethanol than the CARB study 
and \1/4\ of those estimated by Searchinger et al. Tyner et al. note 
their results are significantly less than Searchinger et al. due to 
three factors: (1) the significantly smaller change in total land use, 
(2) differences in which part of the world the change in land use 
occurs, and (3) differing assumptions regarding the percent of carbon 
stored in forest vegetation that is emitted when forest is converted 
into cropland (Searchinger et al. assumes 100 percent of carbon stored 
in forest vegetation is emitted while Tyner et al. assumes 75 percent 
of the carbon stored in forest vegetation is emitted with the remaining 
25 percent stored in long-term wood products).

                             Table 2--Land Use Change and CO2 Emissions From Ethanol
----------------------------------------------------------------------------------------------------------------
                                                           Increase in    Change in     Change in        CO2
                                                             ethanol     Global Land   Global Land   equivalent
                                                           production        Use           Use      emissions
                                              Modeling   ------------------------------------------
                   Study                      framework                                            -------------
                                                             Billion       Million       Million     Grams CO2-
                                                             gallons        acres       acres per    Eq. per MJ
                                                                                        bil. gal     of Ethanol
----------------------------------------------------------------------------------------------------------------
Searchinger et al. 2008 \1\                  FAPRI/CARD         14.8          26.73          1.81          104
----------------------------------------------------------------------------------------------------------------
Fabiosa et al. 2009 \2\                      FAPRI/CARD          1.174         1.923         1.638         N/A
----------------------------------------------------------------------------------------------------------------
California (CARB) 2009                             GTAP         13.25          9.62          0.726          30
----------------------------------------------------------------------------------------------------------------
Tyner et al. 2009 \3\                              GTAP
  2001 to 2006                                                   3.085         1.8           0.576          20.8
  2006 to 7 BG                                                   2.145         1.3           0.625          22.7
  7 to 9 BG                                                      2             1.3           0.658          23.8
  9 to 11 BG                                                     2             1.4           0.689          24.9
  11 to 13 BG                                                    2             1.4           0.722          26.1
  13 to 15 BG                                                    2             1.5           0.759          27.4
  2001 to 15 BG                                                 13.23          8.77          0.663          24.0
----------------------------------------------------------------------------------------------------------------
\1\ Searchinger et al. reported their results in terms of a 55.92 billion liter increase in ethanol production
  which resulted in a 10.8 million hectare change in global land use.
\2\ Based on a ten percent increase in U.S. ethanol use using 10 year averages of U.S. ethanol use and world
  crop area taken from the 2007 FAPRI baseline. Impact multiplier of 0.009 taken from Fabiosa et al., table 2.
\3\ Based on data from Table 7 and Table 8 and converted to MJ of ethanol by assuming each gallon of ethanol
  contains 76,330 Btu's of energy and each Btu is equal to 0.00105 megajoules (MJ).

Sources of Uncertainty
    Modeling the change in land use resulting from the expansion in the 
production of corn-starch based ethanol, requires making projections 
about future values of parameters that cannot be known with certainty. 
Therefore, judgments and assumptions must be made as to the likely 
values these uncertain data will take. Each assumption, whether made 
explicitly or implicitly in the structure and data of the model, will 
influence the outcome. Here is a partial list of some of the major 
assumptions that influence the estimate of GHG emissions from corn-
starch based ethanol and other biofuels.
    Yields on converted lands. Estimating the yields on converted land 
is one of the most important aspects associated with the GHG emissions 
and land use change. In the CARB analysis, a small change in the 
expected yields on converted land had a large impact on the amount of 
land necessary to meet the added demand for renewable energy and, 
therefore, on GHG emissions. When yields on converted land were 
expected to be more similar to yields on existing land, only 500,000 
acres of additional cropland were required to produce each billion 
gallons of ethanol and the emissions associated with land use change 
fell to 18.3 grams of CO2 equivalent per MJ of ethanol; a 
reduction of almost 40 percent. Alternatively, when yields on converted 
land were expected to be lower than yields on existing land, 850,000 
acres of additional cropland were required to produce each billion 
gallons of ethanol and the emissions associated with land use change 
increased to 35.3 grams of CO2 equivalent per MJ of ethanol; 
an increase of about 18 percent. Unfortunately, as discussed in the 
CARB analysis, there is little empirical evidence to guide modelers in 
selecting the appropriate value for estimating the productivity of 
converted land. There is even experience to suggest that yields on 
converted land may be higher than yields on existing land. For example, 
when Brazil began expanding soybean production from the temperate South 
into the tropical Center-West, research led to the development of a 
soybean variety that flourished in the tropics. As a result, soybean 
yields in the tropical Center-West were double that of the national 
average. On the other hand, in many other regions, existing crops are 
already on the most productive agriculture land, so yields on newly 
converted lands would be lower than on existing cropland. On net, we 
would not expect to see significantly higher yields on converted land, 
but there is little information on how yields may change when land is 
converted.
    Shifts between different land uses. Converting land from one land 
use to another can have dramatic impacts on the emissions associated 
with land use change. However, it is difficult to model the specific 
contribution of the many factors that determine land use, especially 
when changing between broad land use categories. It is one thing to try 
to estimate the movement of land allocation among different crops, such 
as switching between corn and soybeans. However, land conversion 
between land uses, such as from forest to pastureland or cropland can 
be very costly and therefore driven by longer-term economic factors. 
For example, Midwest farmers can readily move cropland between corn and 
soybeans when the relative profitability of those crops change. In 
contrast, expansion of agricultural land into other areas will depend 
on the cost of conversion of that land and land supply availability. 
For land that is currently in active use there are decisions to be made 
on long term profitability, for example for land to be converted from 
forest to cropland, long term decisions must be made regarding the 
relative profitability between agricultural and forestry commodities 
for many years into the future. Conversion of land that does not have a 
current market use (grassland or unmanaged forest) would be based on 
costs of conversion, land availability, and in addition, there are 
several non-economic factors that may significantly affect land 
conversion decisions in a particular area or country, such as national 
conservation and preservation policies and programs.
    Some studies have suggested that conversion of land into cropland 
would be associated with grassland conversion because it costs less to 
clear and prepare grassland than clearing and preparing forestland. In 
the Tyner et al. study, for example, 23 percent of the increase in 
cropland comes from conversion of managed forest. The remaining 77 
percent of the increase in cropland is a result of the conversion of 
grassland to cropland. While a majority of the land conversion is from 
grassland to cropland, a majority of the emissions due to land use 
change result from the conversion of forests to cropland, due to the 
relatively larger GHG pulse associated with forest conversion. If we 
assume there is no forest conversion and only grassland conversion, the 
emissions associated land use change estimated by Tyner et al. would 
fall by 50 percent. In many studies, estimates of forest conversion 
surfaces as a key factor driving the lifecycle GHG results. In 
addition, the GTAP modeling framework used by CARB and Tyner et al. 
includes only managed lands. This could also influencing the type of 
land conversion predicted by the model.
    Yield growth over time. Another important factor driving the amount 
of land required to produce biofuels is the growth in yields that are 
expected to occur over time. At USDA, we estimate that corn yields in 
the United States will grow at 2 bushels per acre. If we assume that 
global corn yield growth increases at the same rate as in the United 
States, by the 2015, the average corn yield in the rest of the world 
would be about ten percent higher than used in the CARB study. The 
increase in land productivity in the rest of the world would reduce the 
estimated amount of land converted into cropland in the CARB study from 
726,000 acres to 663,000 acres for each additional billion gallons of 
corn-starch based ethanol, and the average GHG emissions due to land 
use change would fall from 30 grams of CO2 equivalent per MJ 
of ethanol to 27 grams of CO2 equivalent per MJ of ethanol.
    In addition, higher commodity prices due to greater demand for 
renewable fuels would likely result in some increase in crop yields. In 
the CARB analysis, each one percent increase in the price of corn 
relative to the input costs associated with growing corn was assumed to 
increase corn yields by 0.4 percent. Varying that assumption from a 0.1 
to a 0.6 percent increase in yields for each one percent in the price 
of corn relative to inputs costs altered the estimate of GHG emissions 
due to land use change by 49 percent.
    Substitutability of Distillers Dried Grains (DDGs). DDGs are a co-
product of corn-starch based ethanol production, and can substitute for 
corn as feed, thereby reducing the amount of corn which goes directly 
into livestock feed. Thus, the more DDGs that are assumed to be used in 
livestock feed, the fewer total cropland acres will be needed and 
therefore less GHG emissions. For example, each bushel of corn 
generates about 2.8 gallons of ethanol and almost 18 pounds of DDGS. In 
the CARB study, each pound of DDGs is assumed to displace one pound of 
corn. However, DDGs have attributes that may allow a greater than a 
one-for-one displacement of corn in animal feed. DDGs have higher 
protein and fat content compared to corn. Tyner et al. assume each 
pound of DDGs replaces 1.16 pounds of corn as animal feed. Arora et al. 
recently found that 1 pound of DDGs displaces 1.271 pounds of 
conventional feed ingredients. However, DDGs cannot completely replace 
traditional feed.
    Other Sources of Uncertainty. In addition to the uncertainties 
discussed above, many other modeling assumptions will influence the 
predicted impact of added renewable fuel production on GHG emissions, 
(e.g., the level of disaggregation in the underlying crop data, 
assumptions about international trade in agricultural commodities, 
assumptions about changes in fertilizer use, etc.). There are also 
simplifying assumptions that relate to accounting for future GHG 
emissions. Generally, when comparing the GHG emissions of renewable 
fuels to nonrenewable alternatives, studies assume that increases in 
GHG emissions from land use conversion occur in the year of conversion, 
while reductions in GHG emissions due to the production and use of 
renewable fuels occur over several years into the future. For example, 
the results from the studies referenced in this testimony assume the 
reduction in GHG emissions from expanded ethanol production occur over 
a period of 30 years. Increasing the expected time frame for renewable 
fuel production on converted land reduces their net GHG emissions, 
because the total emissions reductions associated with producing and 
using renewable fuels will be greater.
Conclusions
    There is little question that increased biofuel production will 
have effects on land use in the United States and the rest of the 
world. The more interesting question concerns magnitude. To the degree 
to which the supply response to increased biofuel production is met 
through increased yields, cropland expansion will be less. Land use 
change is more likely to occur where producers are more responsive to 
price changes. How much pasture and forest is converted to cropland 
will ultimately depend on the region, national and local land use 
policies and the degree to which competing uses (grazing, forest 
products) impose constraints for expansion.
    While economic modelers have a long history of policy analysis in 
agriculture, most of the analyses have focused on impact of various 
domestic or international trade policies (e.g., farm bills, trade 
agreements) on cropland. By contrast, the empirical literature on land 
use and GHG emissions is relatively young, with most studies appearing 
in the last 2 or 3 years. Sensitivity analysis suggests wide variation 
in results. In particular, much is to be learned about land conversion 
from forest to pasture and from pasture to cropland.
    We have had a very constructive and cooperative relationship with 
EPA as they have developed their RFS2 proposal. Their proposal raises 
challenging issues for public comment and will do much to advance the 
scientific understanding of the lifecycle GHG emission impacts of 
biofuels, and in particular the land-use change impacts. USDA looks 
forward to continuing our relationship with EPA as they complete the 
work necessary to finalize the RFS2 rule.
    Mr. Chairman, that concludes my statement.
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    United States Department of Agriculture. Economic Research Service/
Office of the Chief Economist. ``An Analysis of the Effects of an 
Expansion in Biofuel on U.S. Agriculture.'' May 2007.
    Wang, Michael, May Wu and Hong Huo. ``Life-cycle energy and 
greenhouse gas emission impacts of different corn ethanol plant 
types.'' Environmental Research Letters. Vol. 2. April-June 2007.

    The Chairman. Thank you, Dr. Glauber.
    Ms. Oge.

         STATEMENT OF MARGO T. OGE, DIRECTOR, OFFICE OF
 TRANSPORTATION AND AIR QUALITY, OFFICE OF AIR AND RADIATION, 
     U.S. ENVIRONMENTAL PROTECTION AGENCY, WASHINGTON, D.C.

    Ms. Oge. Good morning. Thank you, Mr. Chairman and Members 
of the Subcommittee. I truly appreciate the opportunity to 
testify today about the Renewable Fuel Standard required by the 
Energy Independence and Security Act of 2007. My name is Margo 
Oge. I am the Director of the Office of Transportation and Air 
Quality. I am a career civil servant, and I am proud that I 
have been with EPA for almost 30 years, my whole career.
    I am very pleased also to share that, yesterday, 
Administrator Lisa Jackson signed a proposal to implement 
EISA's Renewable Fuel Standard, commonly called RFS2. This 
proposal is a critical step towards achieving energy 
independence, creating jobs in the United States, and reducing 
the greenhouse gas emissions that cause global warming.
    As you know, EISA requires a substantial increase in the 
volume of renewable fuels that is blended into the U.S. 
transportation fuel pool. The total volume of renewable fuel 
must reach 36 billion gallons by 2022.
    EPA estimates 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 from the transportation sector by 
approximately 150 to 160 million tons of CO2 
equivalent per year. That is equal to removing approximately 24 
million cars from the road. That is pretty significant.
    We also have calculated that this program when it is 
implemented will bring about $3 billion in total energy 
security benefits and could displace 15 billion gallons of 
gasoline and diesel fuel from the transportation sector.
    Finally, we estimate that the net U.S. farm income would 
increase by about $7 billion.
    Clearly a central future of this proposal is its focus on 
lifecycle greenhouse gas impact of renewable fuels. Congress 
established through EISA the first mandatory lifecycle 
greenhouse gas reduction thresholds for each of the four 
categories of renewable fuels. They must perform better when it 
comes to greenhouse gas emissions from the fuels that they are 
displacing.
    To implement these thresholds it has required EPA to look 
broadly at lifecycle analysis and to develop a methodology that 
accounts for all factors that may significantly influence this 
assessment. This includes both direct and indirect impacts, 
including indirect land use.
    Mr. Chairman and Members of the Subcommittee, we do 
recognize the potential implications of this work. To that end 
we have spent the last year and a half creating what we believe 
represents the best scientifically-supported methodology. This 
methodology uses the best tools and science available today and 
identifies both direct and indirect emissions, including those 
resulting from international land use change.
    Also, EPA has worked extensively with experts across the 
Federal Government. Clearly we have worked with Dr. Glauber and 
his colleagues at the USDA, but also we have reached out to the 
outside experts, both domestic and international stakeholders. 
The resulting methodology is an important first step in 
advancing the science behind greenhouse gas emissions from 
biofuel production and use, and meets EPA's statutory 
obligations under EISA.
    Clearly there are some, as you know, that have expressed 
concerns that the science of assessing greenhouse gas 
emissions, related especially to international land use 
changes, is very immature and subject to uncertainty; actually, 
significant uncertainty. They have suggested that EPA should 
disregard such emissions.
    There are two problems with this approach. First, it would 
be inconsistent with EISA's statutory provisions passed by 
Congress. Second, ignoring such a large contributor of 
greenhouse gas emissions would render the concept of lifecycle 
analysis, which was mandated by Congress, scientifically less 
credible.
    Mr. Chairman, the proposal that was announced yesterday is 
the beginning of a very important dialogue. We recognize that 
there are varying degrees of uncertainty in different aspects 
of the analysis, especially with indirect land use. To address 
the uncertainties surrounding the analysis, EPA is actively 
soliciting peer review comments from the scientific community, 
and also from the public at large.
    In closing, I believe EPA has put forward a proposal that 
is responsive to Congressional intent. The proposal offers an 
important opportunity for EPA to present this work and to have 
an open and transparent dialogue with all stakeholders during 
the public comment period.
    Thank you again for the opportunity to present this 
testimony. I am looking forward to answering your questions.
    [The prepared statement of Ms. Oge follows:]

Prepared Statement of Margo T. Oge, Director, Office of Transportation 
    and Air Quality, Office of Air and Radiation, U.S. Environmental
                  Protection Agency, Washington, D.C.
    Mr. Chairman and Members of the Subcommittee, I appreciate the 
opportunity to appear before you today to testify on the renewable fuel 
provisions of the Energy Independence and Security Act of 2007 (EISA). 
I am pleased to state that EPA has signed a notice of proposed 
rulemaking for the Renewable Fuel Standard included in EISA, commonly 
called RFS2. Signature of the proposed rule is an important step toward 
achieving the significant energy security and greenhouse gas (GHG) 
emission reduction benefits of this program. It also provides EPA an 
opportunity to present our work to the public and formally incorporate 
the advice and input we will receive over the coming months.
    This proposed rule would revise the current RFS program, 
established by the Energy Policy Act of 2005, and implement several 
important changes to these renewable fuel requirements. EISA requires a 
substantial increase in the volume of renewable fuel and extends the 
timeframe over which this volume grows. The total volume of renewable 
fuel must reach 36 billion gallons by 2022. Several specific volume 
targets must also be met by 2022, including 21 billion gallons of 
advanced biofuels, comprised of 16 billion gallons of cellulosic 
biofuel, 4 billion gallons of ``other'' advanced biofuels, and a 
minimum of 1 billion gallons of biomass-based diesel. We estimate that 
these greater volumes of biofuels will reduce GHG emissions from 
transportation by an average annualized emissions rate of 150-160 
million tons of CO2 equivalent per year--reductions 
estimated to be equivalent to annual emissions produced by 23 to 24 
million vehicles. EPA also has calculated that the RFS2 rule could 
bring about more than $3 billion in total energy security benefits, 
displacing an estimated 15 billion gallons of petroleum-based gasoline 
and diesel, as well as provide an expanded market for agricultural 
products and open new markets for the development of cellulosic 
feedstocks.
    A central aspect of the RFS2 program is its focus on the lifecycle 
greenhouse gas impact of renewable fuels. EISA created the first U.S. 
mandatory lifecycle greenhouse gas (GHG) reduction thresholds for 
renewable fuels used in the U.S. The statute assigns specific emission 
reduction thresholds for each of the four categories of renewable fuels 
required by the Act--requiring a percentage improvement compared to the 
baseline lifecycle emissions value for gasoline and diesel used in 
2005. EISA requires EPA to look broadly at lifecycle analyses and to 
develop a methodology that accounts for each of the important factors 
that may significantly influence this assessment, including both direct 
and indirect emissions, such as significant emissions from land use 
changes.
    EPA, working with experts from across the Federal Government, 
including experts from the Departments of Agriculture and Energy as 
well as outside experts, has spent the last year and a half creating a 
robust and scientifically supported methodology that identifies direct 
and indirect emissions, including those resulting from international 
land use change. This methodology meets our statutory obligations under 
EISA. Just as importantly, it recognizes that to account for the 
climate-related effects of renewable fuels, the direct emissions 
associated with fuel production and combustion as well as the indirect 
emissions must be taken into account. The United States is committed to 
combating climate change both at home and abroad. President Obama has 
called for a domestic cap and trade program which would reduce U.S. 
emissions by 80% by 2050. We are also actively engaged in working 
towards a successful outcome at the climate negotiations later this 
year in Copenhagen. This process will be supported by the President's 
Major Economies Forum, which seeks to inform and complement the UNFCCC 
process. The EPA proposed rule provides an important step in advancing 
the science behind measuring greenhouse gas emissions from biofuels 
production and use. Comprehensive and science-based lifecycle analysis 
provides the very foundation upon which the climate benefits of the RFS 
program are realized.
    Another reason why indirect emissions are important to identify is 
that, according to our analysis in the proposed rule, these impacts 
comprise a significant portion of the total lifecycle emissions of 
biofuels. Not including or addressing indirect emissions due to land 
use changes would ignore a large part of the greenhouse gas emissions 
associated with different fuels, and would result in a greenhouse gas 
analysis that bears little relationship to the real-world emissions 
impact of the fuels. Nevertheless, we understand that some have 
concerns that the state of the science regarding the assessment of GHG 
emissions related to international land changes is so immature, and 
potentially subject to error, that EPA should disregard or deemphasize 
such emissions, and calculate renewable fuel lifecycle GHG emissions 
assuming that there are no GHG emissions associated with predicted 
international land use changes. We believe such an approach would 
introduce far more error into lifecycle GHG assessment than the EPA 
proposal, which is based on reasoned application of the best available 
science and data. The result of disregarding land use changes would be 
to ignore the developing science in this area, and to overstate, 
perhaps dramatically, the GHG benefits of renewable fuels.
    However, we recognize that it is important to address questions 
regarding the science of measuring indirect impacts, particularly on 
the topic of uncertainty. For this reason, we have developed a 
methodology that uses the very best tools and science available, 
utilizes input from experts and stakeholders from a multitude of 
disciplines, and maximizes the transparency of our approach and our 
assumptions in the proposed rule.
    On the first point, our analysis relies on peer-reviewed models, 
including comprehensive agricultural sector models such as the Food and 
Agricultural Policy Research Institute (FAPRI) model that have been 
used widely to analyze the impacts of numerous agricultural sector 
policies including recent farm bills. We also have used the most 
current estimates of key trends in agricultural practices and fuel 
production technologies and have reviewed the growing body of 
literature on lifecycle analysis and indirect land use change.
    Our work with experts and stakeholders has involved extensive 
coordination in the development of our methodology and selection of 
inputs and models. For example, my staff met frequently with the 
Departments of Agriculture and Energy to share our analytical plan, 
request feedback on our key assumptions, and provide preliminary 
results as they became available. In many cases, we adopted the inputs 
and assumptions suggested by these Departments. For example, we have 
used Department of Agriculture models and corn yield forecasts. To 
coordinate key components of our work, we have met on a regular basis 
with other key constituents including renewable fuel producers, 
petroleum refiners and importers, agricultural associations, lifecycle 
analysis experts, environmental groups, vehicle manufacturers, states, 
gasoline and petroleum marketers, pipeline owners and fuel terminal 
operators. We also have worked closely with staff from the California 
Air Resources Board as they have been developing their low carbon fuel 
standard program.
    To maximize transparency, EPA's proposal highlights the assumptions 
and model inputs that particularly influence our assessment and seeks 
comment on these assumptions, the models we have used, and our overall 
methodology. For example, we have particularly highlighted and sought 
comment on our use of satellite imagery data to model land use changes. 
We also conducted a number of sensitivity analyses which focus on key 
parameters and demonstrate how our assessments might change under 
alternative assumptions. For example, the proposed rule presents 
results for scenarios with higher crop yields, stricter land use 
policies in other countries, and other plausible scenarios suggested by 
experts and stakeholders.
    Through this process, EPA has learned a great deal about each stage 
of the lifecycle of renewable fuels. We have learned that the time 
horizon over which emissions are analyzed and the application of a 
discount rate to value near-term versus longer-term emissions are 
critical factors in determining the ultimate GHG impact of biofuels. 
Thus our proposal highlights two options. One option assesses emissions 
impacts over a 100 year time period and discounts future emissions at 
2% annually. The second option assumes a 30 year time period for 
assessing future GHG emissions impacts and values equally all emission 
impacts, regardless of time of emission impact (i.e., uses a 0% 
discount rate). The proposed rule goes into considerable detail 
explaining the conceptual argument informing the use of a particular 
time horizon and discount rate, while also specifically seeking comment 
on this issue, and also discusses several other variations of time 
period and discount rate. We also have greatly expanded our 
understanding of renewable fuel production processes and have 
identified several technologies available today (e.g., membrane 
separation) that can significantly reduce process-related GHG 
emissions. At the same time, we have identified specific areas where 
additional information and input would be useful. For example, the 
proposed rule asks for guidance on our assumptions about future corn 
yields.
    Recognizing that lifecycle analysis is a new part of the RFS 
program and much of our methodology represents groundbreaking science, 
I have directed my staff to create multiple opportunities to solicit 
public and expert feedback on our proposed approach. In addition to the 
formal comment period on the proposed rule, EPA plans to hold a 2 day 
public workshop focused specifically on lifecycle analysis during the 
comment period to assure full understanding of the analyses conducted, 
the issues addressed, and the options that are discussed. We expect 
that this workshop will help ensure that we receive submission of the 
most thoughtful and useful comments to this proposal and that the best 
methodology and assumptions are used for calculating GHG emissions 
impacts of fuels for the final rule. Additionally, although our 
lifecycle analysis relies exclusively on peer-reviewed models and data, 
between this proposal and the final rule, we will conduct additional 
peer-reviews of key components of our analysis, including use of 
satellite data to project the type of future land use changes, methods 
to account for the variable timing of GHG emissions, and how the 
several models we have relied upon are used together to provide overall 
lifecycle GHG estimates.
    In the same way that EISA has introduced lifecycle analysis to the 
RFS program, the statute has introduced restrictions on what feedstocks 
may be used to produce renewable fuel. For example, the new law limits 
the crops and crop residues used to produce renewable fuel to those 
grown on agricultural land cleared or cultivated prior to enactment of 
EISA, that is either actively managed or fallow, and non-forested. EISA 
also requires that forest-related slash and tree thinnings used for 
renewable fuel production pursuant to the Act be harvested from non-
Federal forestlands.
    However, the new renewable biomass provision also presents 
definitional and implementation challenges that we did not have to 
consider when designing the original RFS program. To address these 
challenges, we coordinated with and sought input from a wide range of 
stakeholders, including renewable fuel producers, private forest 
owners, and members of the agricultural and environmental communities, 
as well as with our colleagues in several USDA offices and agencies. 
Based on this extensive outreach and our own additional research, we 
have developed a proposal for public comment that we believe will 
position us to finalize and implement a practical and enforceable 
program.
    With respect to the definitional challenges, there are a number of 
terms used in the renewable biomass definition that are subject to 
interpretation and need to be clarified, such as the terms 
``agricultural land'' and ``actively managed.'' With input from our 
colleagues at USDA and other stakeholder groups, we have proposed 
definitions for these specific terms that are meaningful in the context 
of the RFS program and that match existing industry definitions to the 
extent feasible. We also seek comment on alternative interpretations of 
these terms.
    To fully understand the implementation challenges and opportunities 
presented by the new renewable biomass definition, we held extensive 
discussions with stakeholders. We also investigated existing Federal 
reporting programs and third-party certification programs for 
agricultural and forest products, and for biofuel feedstocks, in the 
hopes of leveraging such programs to avoid redundancy for our regulated 
parties. As described in our proposal, we determined that no single 
existing program or certification system could be relied on to ensure 
compliance with the renewable biomass definition. Therefore, we 
developed our proposal, which would make renewable fuel producers 
responsible for ensuring that feedstocks used to produce renewable fuel 
for credit under the RFS program meet the definition of renewable 
biomass. We expect that renewable fuel producers will work with their 
feedstock producers and suppliers to determine whether or not their 
feedstocks are in compliance. We also seek comment on a wide variety of 
alternative implementation approaches, including establishing an EPA-
specified chain-of-custody tracking system for feedstocks as they move 
through the supply chain, and working with industry to establish an 
industry-wide quality assurance program. Our proposed and alternative 
approaches reflect many of the suggestions we received from 
stakeholders during the drafting process.
    In closing, I believe EPA has put forward a proposal that is 
responsive to Congressional intent and fulfills the economic, energy, 
and environmental goals of the RFS program. We have developed the most 
comprehensive, current and scientifically supported approach undertaken 
to date to assess the lifecycle GHG impacts of renewable fuels. We look 
forward to continuing the dialogue on our approach through the public 
comment process on the proposal and through peer review of the specific 
items I have mentioned. Likewise, I believe our proposed approach for 
interpreting and implementing the EISA definition of renewable biomass 
successfully balances practicality with enforceability to meet the 
intent of Congress in promoting environmentally sound feedstock 
production for renewable fuels. The proposed rule offers an important 
opportunity for EPA to present this work and incorporate the input we 
receive over the coming months.
    In the end, I am confident that we will be able to finalize a RFS2 
rule that will achieve the benefits envisioned by Congress--to reduce 
our dependence on foreign sources of crude oil, diversify our energy 
portfolio, and provide important reductions in greenhouse gas 
emissions.

    The Chairman. Thank you, Ms. Oge.
    Following up on Ranking Member Goodlatte's comments in his 
opening statement, it is unfortunate we did not have more time 
to review your proposal, which was almost 600 pages of notice 
of proposed rule making and 822 pages of regulatory impact 
analysis. I don't believe, and I believe the Ranking Member 
agrees with me, that that is sufficient time for comments.
    So we are going to be sending a letter down to the 
Administrator asking her to extend that comment period by 120 
days to make it a total of 180 days, and I would encourage 
Members of the Subcommittee and all our colleagues in the 
Congress to consider signing onto that.
    Mr. Goodlatte. Mr. Chairman, let me be the first.
    The Chairman. Dr. Glauber, you mentioned in your comments 
that you work closely together on this proposal. Could you be 
more specific how much time was spent, what details, how far 
down into the weeds did you get?
    Dr. Glauber. No. Thanks very much, and I think that shortly 
after passage of the Act and as EPA put a working group 
together several Federal agencies were brought in, including 
USDA, DOE, and others, to help in sort of an advisory capacity 
on various aspects of this. And so EPA solicited input on 
technical aspects of work that had been going on within USDA, 
both in terms of our economic modeling, and also in terms of 
issues like the extensive work we have been doing on distiller 
dried grains. We have provided comments to EPA, and what they 
have typically done is briefed us in terms of where they are in 
development of the rule, and we have given comments.
    Obviously they are using data of ours, but they are the 
ones who are running the models, and they are the ones who are 
putting these things together and with their own cooperators. 
They have been sharing a lot of the results with us, and we 
have responded to those results with questions.
    The Chairman. Well, how confident are you in moving forward 
with the inclusion of indirect emissions, given the current 
science that is available?
    Dr. Glauber. Well, as I pointed out in my testimony, there 
is a great deal of uncertainty. There is no question about--let 
me back up and just say that is true. We do a 10 year baseline 
every year. We have economic models that project what the corn 
price will be over the next 10 years. There is uncertainty 
related to that. On top of those models we are putting 
international land use models that, frankly, I personally have 
a lot less experience with, but all that literature was 
developed over the last few years, and so that is very new, a 
view that is very uncertain. I know there is work, and on the 
next panel there are people who have done work and some 
currently looking at international land use.
    But that is where the big source of uncertainty is. You 
know, we do forecasts all the time, and people take that 
uncertainty with the forecast in one sense. The difference here 
is, of course, you are regulating on it, regulating on the 
outcomes of this modeling effort, and that is the big question.
    As the Administrator said, I think EPA is very clear on 
what they feel the Act requires them to do in terms of setting 
standards or estimating the effects of land use change to do 
estimates of greenhouse gas emissions.
    The Chairman. There are competing definitions for renewable 
biomass currently in the law; one in H.R. 6 and one in the 
recently passed farm bill and now there are various definitions 
in introduced bills and proposals. How do you think the 
competing definitions will impact on the future of biofuel 
development?
    Both of you.
    Dr. Glauber. Okay. Let me just say that we have heard 
comments earlier, and I would agree wholeheartedly. I think 
unfortunately the definition in EISA is a very, very restricted 
definition, and one, it precludes biomass from, in most cases 
from Federal lands. There are a lot of good cases for thinnings 
and other sorts of practices that we maintain on Federal lands 
that are very important. And then insofar as private lands are 
concerned, frankly most of the biomass we are talking about are 
things from tree plantations, where you plant rather than 
naturally regenerated forests and the sorts of good management 
practices that we might want to encourage in private forests. 
Congressman Goodlatte made those points very eloquently.
    The Chairman. My time has expired, but Ms. Oge, if you want 
to comment briefly.
    Ms. Oge. Clearly, Mr. Chairman, we have worked very closely 
with USDA. I would say that when we sat down to figure out how 
do we go about addressing this very challenging issue of doing 
a lifecycle analysis for all stages of biofuels, we sat down 
with USDA and Department of Energy, and we agree upon all the 
inputs that went into the models and the type of models that we 
used.
    Clearly, as I said in my testimony, both oral and written 
testimony, there is a lot of uncertainty. We are looking 
forward to the comment period that is in front of us to have 
that dialogue with the scientific community in an effort to 
narrow the gap on the uncertainties.
    As far as the various definitions, as you said, there are 
distinct differences between EISA, the farm bill, and other 
definitions that USDA is using. We have attempted to the best 
of our efforts to try to harmonize the definitions, but, again, 
we have to stay true in implementing EISA. We have to stay 
within the EISA framework, the legal framework, and that is 
what we have done.
    We have attempted to seek comments how we can better 
harmonize the EISA definitions with the farm bill, and we are 
looking forward to the comments from the public.
    The Chairman. Thank you.
    The chair recognizes the Ranking Member, Mr. Goodlatte.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    Ms. Oge, Dr. Glauber's testimony talked about the 
uncertainty of modeling the change in land use, among other 
issues. The EPA uses several different models together to 
develop the greenhouse gas lifecycle analysis. This is a 
process that EPA admits has never been done before.
    I am curious as to why the proposed regulations came out 
before a peer review had been completed.
    Ms. Oge. This is the first time that formal lifecycle 
analysis has been done. So EPA, about a year and a half ago 
when EISA was passed into law, we sat down with those experts 
to understand what is the best methodology that we could use to 
meet the requirements of the statute.
    We are using peer reviewed models, and a lot of peer 
reviewed data.
    Mr. Goodlatte. Ms. Oge, once you have produced this brand 
new methodology, so that we all could see it, not just take 
your word for it that you used experts in putting together, why 
wouldn't you do that peer review process after you had it done. 
So, you would effectively be looking before you leaped, because 
you have leaped into a bold new area here that has drawn a 
pretty negative reaction on both sides of the aisle here.
    And my follow-up question to you about this is are you 
going to do a peer review process now?
    Ms. Oge. May I----
    Mr. Goodlatte. And if so, are you going to allow the public 
to comment on those peer reviews, because we are not having any 
opportunity to see what other respected scientists, which you 
may or may not have consulted. Or you may have consulted folks 
on one side of this debate and not on the other, but we are not 
getting a look into how you came upon this very novel 
methodology. We are not able to comment on the views of 
respected scientists in this area whose views we might like to 
have as we comment in this 60-day period that we have. And I 
fully agree with the Chairman that it should be extended 
dramatically, at least to 180 days so we can figure out what is 
going on here.
    Ms. Oge. To your first question, why we didn't go ahead 
with a peer review. The first thing that we had to do is to 
have a broad discussion in a pretty open and transparent way 
with all the experts in this field. The two models that we are 
using are models that Congress has used, USDA has used. They 
are the best models available to us to do the work that 
Congress has tasked us to do.
    In order to peer review the results, you have to have 
results. The results were not available to us until fall of 
last year. That was the time that we sent a package to the 
Office of Management Budget. But we did have a very transparent 
process. We were talking with USDA or the----
    Mr. Goodlatte. The question is why would you rush to 
judgment without having the benefits of other experts looking 
at your finished product?
    Ms. Oge. We didn't have a finished product. The finished 
product, sir, is available now. You cannot have a small piece 
of the model being peer reviewed. You have to look at the whole 
record.
    Mr. Goodlatte. I understand that.
    Ms. Oge. And the whole record is part of what we are 
putting out today. This is the proposal, we have 500 pages 
explaining the methodology and another 300 pages of the 
technical inputs of the model.
    Mr. Goodlatte. Well, let me move on to another question 
since my time is limited, but I will say that the process is 
very accelerated here and is not giving people an opportunity 
to see what you are doing, or to have the benefit of the well-
established thoughts of other experts in the area.
    But let me move onto another area. You mentioned in your 
testimony that what you are hoping to accomplish with the 
Renewable Fuel Standard is to reduce the carbon emissions of 24 
million vehicles, which is obviously a respected standard. But 
it is ironic that the authors and supporters of this 
legislation tout the benefits of the RFS as a way to reduce 
greenhouse gas emissions, yet because of the feedstock 
restrictions, it will do little to help with one of the largest 
sources of emissions; wildfires.
    Have you considered that? Last year alone, 9 million acres 
of forests burned, emitting roughly 60 million tons of carbon. 
That is roughly the equivalent of 12 million vehicles for 1 
year. How could the RFS help with this problem? In implementing 
the provisions relating to greenhouse gas emissions is the EPA 
considering ways to curb these emissions?
    Ms. Oge. The 160 million metric tons of CO2 
equivalent to removing 24 million cars from the road is based 
on the 36 billion gallons of renewable fuel as mandated for 
2022. The statute does allow biomass to be used if it comes 
from areas that are posing fire hazards. So the preamble has a 
discussion, a pretty significant discussion, again, that we 
hope that we can have dialogue with the general public, how to 
best implement that provision of the statute.
    Mr. Goodlatte. Would you agree with me that it would be a 
good idea to expand the available acreage of forestland that 
could be thinned to reduce the risk of forest fires, improve 
the health of the forest, and reduce greenhouse gas emissions 
at the same time?
    Ms. Oge. Sir, I am here to tell you the steps that we have 
taken to implement the EISA laws passed by Congress. If 
Congress is interested of providing additional provisions or 
changes to that law, I would----
    Mr. Goodlatte. Well, many of us in Congress are interested 
in doing that. We wonder if you think that would be helpful.
    Ms. Oge. I cannot talk about future provisions that 
potentially Congress would like. The only thing that I can tell 
you is that we would be more than glad to provide whatever 
technical assistance that you or other Members of the 
Subcommittee are interested in this issue.
    Mr. Goodlatte. Well, thank you. We would welcome that.
    Ms. Oge. Thank you.
    The Chairman. The chair thanks the gentleman and recognizes 
the gentleman from Michigan, Mr. Schauer.
    Mr. Schauer. Thank you very much, Mr. Chairman, and thanks 
to you both. I am a new Member of this Committee and 
specifically of the Subcommittee, represent a rural district in 
southern Michigan. I have two ethanol plants, a biodiesel plant 
that is now closed. I specifically chose to be on this 
Subcommittee because of the opportunity to grow bioenergy jobs, 
particularly in my state and my district. I have one county in 
my district with an unemployment rate of over 18 percent, and 
what is happening with the auto industry. We have incredible 
promise to grow this area in our economy to not only protect 
the environment, but also support farmers and the auto 
industry.
    Just specifically asking for your advice for what message I 
can send to farmers in my district, what promise do they have 
for opportunities to grow new products that can get into the 
biomass energy stream.
    Ms. Oge. Well, first of all, I strongly believe that the 
EISA requirements provide tremendous opportunity for the 
country to stop its dependence on foreign oil and to help us 
address greenhouse gas emissions. The statute, as you probably 
know, allows for a broad grandfathering of facilities all the 
way to the 2010, which we believe is approximately 15 billion 
gallons of corn ethanol, which is the requirement under EISA.
    So regardless, at the end of the day, whatever the 
Administration is going to decide on the lifecycle and 
threshold for corn ethanol--15 billion gallons of corn ethanol, 
that is the requirement under EISA, is grandfathered under the 
proposed rule that we published yesterday.
    Clearly, the second generation of biofuels is where we 
believe you are going to have the greatest opportunity to 
reduce the carbon footprint of the transportation sector. And, 
again, the President yesterday with the Department of 
Transportation and the USDA made announcements of providing 
additional assistance across the board to the farming 
community, but especially to the second generation of biofuels.
    So we are very optimistic, and we are talking to many 
organizations that are involved in this area. We are very 
optimistic about the future of the second generation of 
biofuels.
    Mr. Schauer. If I could follow up, Mr. Chairman, and I 
wasn't here when the 2007 legislation was written. It sounds 
like there are some concerns about rules and implementation and 
draft rules that were just presented, apparently, yesterday.
    Is the Department of Agriculture in a position, given all 
of that, to meet now with farmers that are looking to grow new 
crops for the new biofuel economy? Or would that be, based on 
what I am hearing in this Subcommittee, premature? My hope is 
that the answer would be that now we can start meeting with 
those farmers, but I also want to be realistic. I am really 
looking for your help in how we can provide some hope to 
farmers that are looking for new opportunities.
    Dr. Glauber. No, absolutely, it is not premature. We should 
be meeting with them. I think part of the announcement 
yesterday, in fact, was the President was very clear that he 
wants engagement on this. USDA, of course, has several 
provisions that we are in the course of implementing now, in 
the 2008 Farm Bill, that would encourage production of 
biofuels, and so, no, absolutely. This is the time.
    Mr. Schauer. Well, you will be hearing from my office then.
    Thank you.
    The Chairman. The chair thanks the gentleman and recognizes 
the gentleman from Nebraska, Mr. Smith.
    Mr. Smith. Thank you, Mr. Chairman.
    Ms. Oge, if you could elaborate on in your modeling on the 
land use, indirect land use, can you explain why you included 
the foreign lands within that proposal?
    Ms. Oge. EISA requires that we look at all stages of the 
production all the way to the time where the consumer uses the 
fuel, look at both direct and indirect impacts and include 
significant indirect impacts specifically with land use. So we 
have to include international activities, and given the fact 
that setting aside the uncertainty with international land use, 
all this points that indirect land use is significant.
    So clearly by excluding that activity we would not be able 
to fulfill the statute as passed by Congress.
    Mr. Smith. Is there any reflection in the report that 
reflects what we have more control over than what we don't 
regarding domestic or foreign lands?
    Ms. Oge. Well, the land use lifecycle issues are new for 
biofuels. There are guidelines going back to 25, 30 years on 
how to do lifecycle analysis. So the lifecycle analysis 
includes all activities. For example, when we did lifecycle 
analysis of petroleum, which is the baseline for gasoline and 
diesel, we had to look at significant actions when you produce 
petroleum. For example, extraction. Extraction very often 
happens in countries outside of the United States. 
Distribution: So for the petroleum baseline we had to look at 
all those significant activities producing petroleum.
    So we had to do the same when it comes to addressing the 
lifecycle methodology for biofuels, and there is no question 
that we should include it. I think the issue that is in front 
of us, which EPA agrees, is the uncertainty associated 
including this significant impact that comes from international 
indirect land use.
    So the issue is not really not to include it. Without 
including this international land use you would not be able to 
fulfill the holistic approach that the statute requires us to 
look at the lifecycle.
    Mr. Smith. Thank you. I found it very interesting as I have 
reviewed further sugarcane-based biofuels compared to corn 
based, and there is a lot of rhetoric and perhaps some 
demagoguery out there that is mischaracterizing and spreading 
some misinformation. I am not saying that you are responsible 
for that, but I think that this report adds fuel to the fire, 
no pun intended, and it is a very problematic situation. And I 
would hope that the agency could set the record straight. I 
think you have probably seen some frustration up here, and I 
share that frustration in my attempt to set the record 
straight.
    So thank you, Mr. Chairman.
    The Chairman. The chair thanks the gentleman and recognizes 
the gentleman from North Carolina, Mr. Kissell.
    Mr. Kissell. Thank you, Mr. Chairman, and thank the 
witnesses for being here.
    I quickly want to say, like my colleague from Michigan, I 
am new on this Committee, and one of the reasons I requested 
this Subcommittee is North Carolina has a lot of forests and 
fields and capabilities of biomass fuel production, and I would 
want to add my voice to the list of expanding that definition.
    But also, Ms. Oge, the 500 pages that are in this report, 
for someone new to the Committee, for what purpose was that 
report written, what should we be looking for there, and why 
was it presented?
    Ms. Oge. Sir, in order to implement EISA we have to develop 
implementing regulations. So it is pretty routine that the 
agency has to look at all the elements of the EISA law that 
passed and interpret those elements and lay forward an approach 
that will allow us to implement this law.
    Clearly there are a lot of complex issues anywhere from the 
four different standards that the statute requires, various 
definitions of biomass, various definitions of land that is 
excluded and included for the purpose of EISA, and also the 
lifecycle analysis. So what we have done is to lay forward a 
set of options and analyses for the purpose of public comments. 
We have asked the public to review the work that the agency has 
done, and we have given 60 days for that review process.
    We are also planning to have a public hearing, a workshop 
to talk about the science associated with this program, and 
then after the public comment period closes, the Administrator 
would look at the comments received. Clearly, there will be 
many comments associated with this proposal that we lay 
forward, and then the Administrator working with other 
agencies, the Department of Agriculture, Department of Energy, 
will make final decisions for this regulation. And the final 
decisions will be placed, hopefully, in sufficient time so we 
can see the 2010 implementation for next year.
    So, again, the purpose of the public proposal yesterday is 
to provide comment, to provide the agency with the opportunity 
to have this public dialogue. We are starting with your 
Committee this morning, broadening to the community and all 
interested stakeholders, and then take those comments and help 
the Administrator to finalize this regulatory program.
    Mr. Kissell. Thank you, and that gives me insight to what 
the 500 pages are. Doesn't it seem somewhere, not to be overly 
cynical, was this law so complicated? Five hundred pages? It 
would seem like that would intimidate the public not to comment 
instead of inviting comment. Was it that far-ranging, that much 
new ground that we are attempting to unravel?
    Ms. Oge. Well, sir, I have been with EPA for many years, 
and I would note that a preamble of 500 to 600 pages is 
extensive. This is pretty typical of regulatory programs that 
we put in place in order to be able to explain the work that 
was done and seek comments. So in order to be transparent and 
open of the thinking that was used to put forward the science, 
we have to go forward and outline all these issues. If we don't 
do that, then we don't give the opportunity for comments.
    But we would be more than glad to have dialogue with any of 
your constituents, anybody that is interested, to talk to the 
agency and get a better sense about the proposal that was 
published yesterday. We would be more than glad to reach out to 
small business, farmers, renewable fuel producers and help them 
understand what is in this proposal so they can provide us 
meaningful comments.
    The Chairman. The chair thanks the gentleman and recognizes 
the gentleman from Ohio, Mr. Latta.
    The gentleman from Missouri.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    Ms. Oge, a quick question for you here. We are talking 
about the impact of renewable fuels on CO2 levels. 
Have you done any studies to see--once we had biofuels in place 
and in usage now for quite some time--what is the impact at 
this point on CO2 levels with the usage of biofuels?
    Ms. Oge. The analysis that we published yesterday shows 
that 36 billion gallons of the use of renewable fuels as the 
EISA requires will have significant reductions of greenhouse 
gas emissions. So----
    Mr. Luetkemeyer. You haven't measured it, though?
    Ms. Oge. Excuse me?
    Mr. Luetkemeyer. You haven't measured it?
    Ms. Oge. The analysis is based on lifecycle approach.
    Mr. Luetkemeyer. You haven't measured. Have you measured 
it? Yes or no? We have had biofuels for a long. I have two 
biofuel, four biofuel plants in my district up and running.
    Ms. Oge. We understand very well by talking to the biofuel 
producers the type of fuel that they are using, energy they are 
using. They are using natural gas versus using coal, what the 
profile of the greenhouse gas emissions will be from those 
sources. You are asking us if we have gone to the plant and 
measured. No, we have not done that, but there is very little 
uncertainty of what the CO2 levels will be from 
those production facilities. And that is the input that we are 
using for this analysis.
    Mr. Luetkemeyer. But you haven't measured it. Is that 
correct?
    Ms. Oge. That is correct.
    Mr. Luetkemeyer. So if we haven't measured it in the past, 
how can we measure it in the future? Do we have that 
information at hand?
    Ms. Oge. Well, again, the lifecycle analysis asks us to 
look at the production of biofuels. There are a lot of studies 
that have measured. I have not personally gone out and measured 
the greenhouse gas emissions, but there are a lot of studies 
that have.
    Mr. Luetkemeyer. Yes, but do we not have a situation in 
place right now where we are using some of these things already 
so that we can take the models of existing usages of these 
things and then project it?
    Ms. Oge. Okay. Sir, we have used over 80 studies on 
lifecycle analysis available where measurements have taken 
place anywhere from the feedstocks, planting the feedstocks, 
transporting the feedstocks, producing them, to using them. In 
our own facility, in our own lab in Ann Arbor, Michigan, we 
measure the greenhouse gas emissions that comes out of cars if 
they use gasoline, if they use biofuels, or they are using 
biodiesel.
    So personally we haven't gone to every plant and measured, 
but there is enough data and clinical data----
    Mr. Luetkemeyer. So we don't know how much effect biofuels 
have on our CO2 levels at this point. Is that what 
you just said?
    Ms. Oge. No. I am not saying that. I am saying----
    Mr. Luetkemeyer. Well, yes, it is, ma'am, because you 
haven't measured it.
    Ms. Oge. No.
    Mr. Luetkemeyer. You just told me that.
    Ms. Oge. Okay. This is what I am saying.
    Mr. Luetkemeyer. What was the CO2 levels 5 years 
ago before we started using biofuels at the level we are at 
today?
    Ms. Oge. Sir, let me finish your first question. We have--
--
    Mr. Luetkemeyer. I have a second question to ask. I am 
sorry.
    Ms. Oge. Okay. We have sufficient studies of clinical data 
of all the stages of the lifecycle analysis of renewable fuels 
to know what the impacts are. We know if you burn biofuel in a 
car, we know, we have measured it. We have measured it in our 
lab. How much greenhouse gas emissions comes out. We know from 
facilities that produce biofuels what is the CO2 
impact. So we know that.
    Five years ago there was less biofuel used. I am sorry I 
don't have the data with me but we would be glad to provide 
that information to you in what were the CO2 
reductions from the usage of biofuels 5 years ago.
    Mr. Luetkemeyer. Okay. Dr. Glauber, real quickly here. How 
has the usage of marginal land increased as a result of biofuel 
technology that has put more feedstocks into production or 
biofuels?
    Dr. Glauber. You are talking historically over, say if we 
look over the last 5 years, clearly we have more corn in 
production. I think that is----
    Mr. Luetkemeyer. No. My question is marginal ground. I know 
we have taken the good----
    Dr. Glauber. And I was building towards that answer. I am 
sorry.
    Mr. Luetkemeyer. I am sorry.
    Dr. Glauber. And what I would look at, and in my testimony 
I present total land planted in the U.S., cropland, and there 
land has gone down over time if you look at the principle crop 
acreage. Total planted area has largely gone down since about 
1996, which would suggest there, now, again, to ascribe that 
all to biofuels is inaccurate, but certainly there is a lot of 
the more marginal lands in the plains, in what I would 
characterize as a more rational rotation now. Those acres are 
not planted every year. You are fallowing more area.
    So if you look at that in terms of what has gone on, there 
has been more corn area that now goes towards ethanol 
production. That is unquestioned. Initially we saw a decrease 
in oilseed area. That has come back up, but if you look at the 
principle crop area, that has been fairly flat over the last 
few years.
    Mr. Luetkemeyer. Okay. Thank you, Mr. Chairman.
    The Chairman. The chair thanks the gentleman and recognizes 
the gentleman from North Dakota, Mr. Pomeroy.
    Mr. Pomeroy. I thank the Chairman for yielding. I have a 
number of questions, more than we can get through in 5 minutes. 
I would say that the concerns expressed by Chairman Peterson, 
as well as Ranking Member Goodlatte, reflect the thinking that 
certainly I have as one Member and shared by an awful lot of 
Members of this Committee. And I would probably note this is 
the beginning of a substantial and vigorous dialogue between 
the Committee and the agency on these matters.
    Mr. Subcommittee Chairman, I certainly applaud you for what 
has turned out to be a very timely hearing in light of 
yesterday's proposed rule.
    As I understand it, is your last name pronounced Oge?
    Ms. Oge. Oge.
    Mr. Pomeroy. Oge?
    Ms. Oge. Yes.
    Mr. Pomeroy. Not Oger. Oge. Okay. The grandfathering would 
basically contemplate much of the ethanol, corn-based ethanol, 
plants that have presently been constructed, would virtually 
include all of the plants constructed?
    Ms. Oge. Yes, sir. Based on the analysis that we have done 
and the way that we have gone about interpreting the provision 
of grandfathering under EISA, we believe that all 15 billion 
gallons of corn ethanol will be grandfathered, and this is the 
volume that is required under the EISA statute for corn-based 
ethanol.
    Mr. Pomeroy. I mean, it is terribly important, this 
investment made in good faith, not be just relegated to rusting 
hulks of steel on the prairie, that we do, indeed, accommodate 
their production.
    Ms. Oge. Yes.
    Mr. Pomeroy. Now, another type of biofuel, biodiesel, also 
has had substantial ramp up in capacity and a statutory goal of 
500, a target of 500 million gallons, yet there is no 
grandfather proposed for biodiesel plants. Why wouldn't you 
treat biomass-based diesel programs like ethanol?
    Ms. Oge. We believe that the statute is very clear on the 
grandfathering provision. It is intended for corn-based ethanol 
and not biodiesel.
    Mr. Pomeroy. Do you believe that the 500 million gallon 
statutory provision for biodiesel production could be met under 
your proposal?
    Ms. Oge. Again, in the proposal we have laid out a set of 
different scenarios to address all feedstocks, including 
biodiesel from both sources, soy and waste. There is at least 
one approach that the agency is exploring as part of this 
proposal that would allow facilities to average the use of 
waste biodiesel and soy biodiesel. And if that is the approach 
that at the end of this process the agency will finalize, then 
there is the potential of biodiesel to meet the greenhouse gas 
threshold.
    Mr. Pomeroy. This 500 million gallon is a statutory 
provision.
    Ms. Oge. Yes, it is.
    Mr. Pomeroy. And I hear you saying, well, maybe there is a 
possible way if there is a blending of different sources, 
perhaps, which would be permissible, maybe. And that is really 
not satisfactory at all in my opinion. There has been very 
considerable investment made in biodiesel production that you 
would wipe out, and this potential hypothetical maybe 
alternative is not fleshed out. What is clear is what wouldn't 
be allowed. What wouldn't be allowed is what has been 
established, so this is an extraordinarily consequential, I 
might say extraordinarily unacceptable proposed rule. It would 
have really a devastating impact to any investor in those 
plants that now have a production capacity, I am informed, of 
better than 2 billion gallons.
    Do you propose to deal with that at or, or is that just 
kind of out of your scope of review?
    Ms. Oge. We understand the issues and the concerns that you 
are raising about biodiesel. As I said earlier, there is a 
proposal that, if it gets finalized, we believe will allow the 
biodiesel market to meet the 500 million. The purpose of this 
process is to have the public dialogue and get input, and we 
appreciate your comments. We are seeking ways, again, within 
the statutory requirements of EISA with the greenhouse gas 
thresholds required and the work that we need to do to put 
forward a legally-defensible program to address the issues that 
you are raising. We are looking forward to having dialogue with 
you, the biodiesel sector, and see how we can address this very 
important issue.
    We agree and we understand the issue that you are raising.
    Mr. Pomeroy. Dr. Glauber, is USDA comfortable with the 
direction of the proposed EPA rule?
    Dr. Glauber. Again, as I have said, we have worked with EPA 
on this, providing comments. Certainly our concerns are exactly 
what you have pointed out. As far as corn-based ethanol is 
concerned, the Act covers that in the sense of the 
grandfathering would allow it to meet that potential cap of 15 
billion gallons of cornstarch-based ethanol.
    The more difficult issue is the effects on biodiesel of 
this analysis, and in particular soy-based biodiesel. I think 
it is very clear at least from the analysis that biodiesel from 
waste products, for example, or from waste grease and from 
animal products would qualify.
    And so because of that here you have a criteria laid out in 
the Act that they have to meet a 50 percent reduction in 
greenhouse gas emissions, and then through this analysis it 
falls short of that. That is where one worries about, okay, did 
you get the right number, and I think that is the thing we are 
all trying to grapple with here, is make sure we have the best 
number possible for this.
    As I pointed out, I think there is great uncertainty around 
these numbers.
    Mr. Pomeroy. I know I am out of time, Mr. Chairman. I just 
conclude that it appears as though the vigorous discussions 
ahead are not just between Congress and EPA. They are within 
EPA and other elements of the Administration, and I am happy to 
hear that there is other, vigorous input, particularly from the 
U.S. Department of Agriculture continuing on this matter.
    Dr. Glauber. And EPA to their credit has asked for our 
input several times, and we will be there every time we are 
asked.
    Mr. Pomeroy. Well, it is fine to ask, but I want more 
consideration of the input received in the final product.
    Thank you, Mr. Chairman. I yield back.
    Dr. Glauber. We will be vocal.
    The Chairman. The chair thanks the gentleman and recognizes 
the gentleman from Kansas, Mr. Moran.
    Mr. Moran. Mr. Chairman, thank you and to Mr. Goodlatte for 
hosting this hearing.
    In my stereotypical way I guess I would expect this kind of 
rule from the Environmental Protection Agency, but I am 
troubled by Dr. Glauber's response to the gentleman from North 
Dakota's response about comfortability. What I would expect 
from a Department of Agriculture is an advocacy for 
agriculture, for rural America for a bioenergy industry, and 
what I hear is we are providing information. I would think you 
would be here today on behalf of USDA or someone from USDA 
would be here raising real concerns with this proposed 
regulation, this policy.
    And while I can understand that we can have a discussion 
about the indirect land use, I do not understand why we would 
have any level of comfortability with indirect land use from 
foreign countries. I certainly don't understand why the 
Department of Agriculture would have any level of 
comfortability in regard to indirect land use applied against 
biofuels, but not against other sources of fuel in the United 
States.
    So in my stereotypical world I can understand the 
Environmental Protection Agency being here. That is not 
something that I would find unexpected, but I would hope that 
the Department of Agriculture would be an advocate for 
something that we have heard year after year from Secretaries 
of Agriculture under all Administrations about the value of 
biofuels and what it means to this country. We have heard that 
from Department of Energy officials, and I share the Chairman 
of the full Committee's sentiments that he expressed, I was 
going to say eloquently. I don't know that he was eloquent, but 
he was certainly forthright about the direction that this kind 
of regulation will have, what affect it will have upon an 
industry that is really struggling today to survive. This is 
just one more proverbial nail, and we have seen the consequence 
of what has happened with California's decision in regard to 
indirect land use, and what that means to the ability for 
Kansas ethanol industry to export ethanol to another state. We 
are now headed down a path in a way that is totally contrary to 
the goals that we have set forth, not just those of us on the 
Agriculture Committee who look out for rural America and 
profitability, opportunities for success in rural America, but 
as a Member of Congress who cares greatly about our national 
security and what effects our demand for foreign oil places 
upon our circumstances.
    And so Dr. Glauber, I would hope that with further thought 
a different answer to Mr. Pomeroy's question about the 
willingness to provide advice, let us see USDA set forward and 
be a spokesman for something that is very important in this 
country. I am today introducing legislation that is comparable, 
although not identical, to legislation that a Senator from 
South Dakota, Senator Thune, introduced, and I would encourage 
my colleagues to join me. It will restrict the ability to 
utilize indirect land use in regard to EPA's calculations. The 
bill strikes that referenced indirect land use and directs EPA 
to focus on direct lifecycle greenhouse gas emissions.
    Therefore, leveling that playing field between renewable 
fuels and regular gasoline allows individual ethanol producers 
with unique production methods to apply to the EPA for a lower 
carbon score, therefore: encouraging innovation within the 
ethanol industry to try to find out how we can produce ethanol 
in a less carbon-intensive way, a waiver process in regard to 
greenhouse gas reduction requirements similar to what we have 
in the Renewable Fuel Standard. If a state chooses to apply a 
state-level low-carbon fuel standard, this bill would require 
states to use lifecycle greenhouse gas emissions instead of the 
process of indirect land use.
    So I am not sure that was a question, but certainly I am 
raising the flag that this rule is creating tremendous 
challenges for an industry that is important, not just to 
agriculture but to the United States economy and particularly 
to our national security.
    Mr. Chairman, I would encourage my colleagues, if they are 
interested in our legislation, to join us today in sponsoring 
it, and I certainly would add my signature to your letter 
encouraging a longer period of time for public comment. And I 
thank the Chairman and yield back the balance of my time.
    The Chairman. The chair thanks the gentleman and recognizes 
the gentlewoman from Pennsylvania, Mrs. Dahlkemper.
    Mrs. Dahlkemper. Thank you, Mr. Chairman. Thank you for 
this very timely hearing.
    I would like to ask Dr. Glauber a question. If you owned a 
biodiesel or ethanol facility, what three items would cause you 
the most concern about the proposed EPA regulations?
    Dr. Glauber. Well, on the corn ethanol side the concerns I 
have had about the bill, the one concerns the certification of 
requiring that all corn comes from ag use, and EPA is 
soliciting comments in the rule on that. The last thing you 
want is a certificate for every bushel of corn that I am moving 
around the country, that it has come from an ag use. I think 
that as was mentioned, or as the Congressman raised the 
question about marginal lands, I would pretty much say that all 
this is coming from agricultural lands.
    The biodiesel thing, I think the clear thing there is 
whether or not soy-based biodiesel qualifies. Obviously if it 
doesn't qualify, that part of the industry is dealt a big blow, 
and in terms of that there may be an opportunity to mix that 
with animal waste as, again, EPA is soliciting comments on 
that. But frankly, there the issue is the pricing relative to 
animal waste, and I think that that is the big problem. And as 
we know and has been pointed out by others, biodiesel right 
now, if you are a soybean-based biodiesel producer, the margins 
are negative. They have been largely negative this year. That 
is true even, of course, with corn-based ethanol. So these are 
tough times, and to get the sort of investments necessary in 
those, they have to have some assurance that there is a future.
    Mrs. Dahlkemper. Why do you think the European Union has 
not used indirect emissions as part of their programs?
    Dr. Glauber. I am sorry?
    Mrs. Dahlkemper. Why do you think the European Union has 
not used indirect emissions as part of their programs as you 
are looking at direct and indirect?
    Dr. Glauber. Well, frankly, they have been looking at, they 
are considering looking at indirect emissions, and up until 
this point you are right. They have just been using strictly 
direct emissions, as were we. And that, of course, is the big 
difference here. If you look at biodiesel on just a direct 
emissions basis, it has a very large reduction in greenhouse 
gas emissions relative to gasoline. It is only when these 
indirect effects are put in that it doesn't meet the targets 
under EISA.
    Mrs. Dahlkemper. And what is your confidence in measuring 
indirect?
    Dr. Glauber. Well, as I said before, we have concerns about 
the overall uncertainty of this, and, again, if I look at what 
is going on in the U.S., I feel pretty confident with our 
models. The international models, I am confident, to a degree, 
but even there we know less. The real source of uncertainty, in 
my own view, is the land conversion, and it matters. It matters 
a great deal whether or not you are converting new land. 
Whether or not it is coming from other cropland, obviously 
there is very little effect there. If it is coming from 
pasture, there is some effect, but if it is forests, those are 
the big concerns. If those emissions all come from forests, you 
have a huge pulse at the beginning when you cut down those 
forests, and then you have to recoup that over a number of 
years. And that is where the real source of uncertainty in my 
view lies, because if there is an error of 20 percent, 50 
percent, or whatever, then that is where the variance really is 
in that.
    And just let me say. The last thing I want is for 
Congressman Moran to think that I was being too glib with 
Congressman Pomeroy. We are concerned, and we are working 
trying to be very constructive in this, and believe me, we are 
being advocates for the biofuel industry.
    Thank you.
    Mr. Moran. Would the gentlelady yield?
    Mrs. Dahlkemper. I yield.
    Mr. Moran. Thank you, Dr. Glauber, and I feel badly that I 
yielded back my time without giving you an opportunity to 
respond. I do appreciate your efforts, and I recognize you are 
the Department's Economist. My comments are directed broader 
than just you, sir, but I appreciate your response. Thank you.
    Thank you, ma'am.
    Mrs. Dahlkemper. I yield back my time.
    The Chairman. I thank the gentlewoman and recognize the 
gentleman from Iowa, Mr. King.
    Mr. King. Thank you, Mr. Chairman, and I thank the 
witnesses for your testimony. I have, sitting here, picked up a 
perspective, and maybe I could ask some questions and perhaps 
redirect that perspective a little bit.
    I would first ask Ms. Oge, are you familiar with Dr. 
Pimentel's study that evaluates the energy required to produce 
ethanol?
    Ms. Oge. Personally I am not familiar. The lady behind me 
is the director of the program, and she tells me that that 
analysis is reflected in the work that we have provided and was 
published yesterday.
    Mr. King. I just want to compliment her on great staff work 
to give you a little sound signal from back there.
    Ms. Oge. Well, thank you.
    Mr. King. And so Dr. Pimentel's study is reflected there, 
and then I would take that thought, and you recognize that Dr. 
Pimentel's study also includes 4,000 calories per day consumed 
by the farm worker and seven trips across the field and the 
cost of the energy that it takes to produce the tractor, the 
combine, and the equipment?
    Ms. Oge. That is part of the work I am told by my colleague 
that we are looking at now.
    Mr. King. Okay, and I am probably going to end up doing 
this second-hand, and I will perhaps submit some questions 
after the hearing to try to drill into this a little further, 
but for the record of this hearing then I will just make a 
statement on this. Dr. Pimentel's study does do those things, 
and it calculates the energy required to produce the tractor 
and the combine, the planter, the farm equipment. It calculates 
the energy consumed by the farm worker, 4,000 calories a day. 
That is more than I get, by the way. I don't work that hard, 
though. And it compares the energy use and makes a statement 
that it takes more energy to produce ethanol than you get from 
it.
    I would ask if you are familiar with the study done by Dr. 
Wong at the Argonne National Lab in Chicago that calculates the 
energy that goes into producing a gallon equivalent of BTU 
energy of ethanol versus that of gasoline?
    Ms. Oge. Yes. Sir, let me tell you a little bit what we are 
doing with the lifecycle. We are using the international 
standard organization boundaries, so we are using the same 
boundaries and the same elements----
    Mr. King. I am sorry. I am watching the clock tick, and I 
don't mean to interrupt. I really apologize for that, but out 
of the urgency then, if we are using the same boundaries, are 
you also calculating the energy that it takes to produce the 
drill rig and the pump?
    Ms. Oge. No, we are not. Let me tell you what we are doing. 
We are looking at the energy that it takes to extract oil, but 
we don't look at the energy to produce the drill extracting the 
oil. We are not looking at the energy that it takes to build a 
tractor. These are not the activities that we are including in 
the lifecycle analysis.
    Mr. King. Yes, but if Dr. Pimentel's study is incorporated 
into this what is the implication, I will ask for a broader 
answer to that.
    Ms. Oge. What I am saying is that we have looked at his 
study. I am not suggesting that we are accepting the premise 
that to do lifecycle analysis we have to look at the energy 
that goes into using a tractor.
    Mr. King. Okay. Thank you, and I will ask for a broader 
analysis of that.
    But I would ask this. Have you also looked at the amount of 
CO2 equivalent that is sequestered by an acre of 
corn versus an acre of old-growth forest?
    Ms. Oge. I believe we have.
    Mr. King. And would you have a response for this Committee 
as to----
    Ms. Oge. We would be glad to provide it when I go back to 
the office. Unfortunately, there is a lot of data, thousands 
and thousands of pages of data.
    Mr. King. Okay.
    Ms. Oge. I don't remember all of it, but I would be glad 
to----
    Mr. King. Okay.
    Ms. Oge.--give you the information.
    Mr. King. That is okay. I turn to Dr. Glauber and pose the 
question in a different fashion, and let me submit that the 
information that I have says that corn sequesters more carbon 
than an old-growth forest does. Now, you can argue what you do 
with that corn after the fact, but as I look at this ethanol 
situation that we have, and looking at the 15 billion gallon 
RFS standard we have by 2015, which the lady has testified we 
will reach with corn ethanol, and I believe we will, have you 
also calculated that with trend relying yield increases that we 
will arrive at that without using any more acres of corn?
    Dr. Glauber. Well, that is right. When we look at our 
baselines, and I believe EPA looked at or used our own analyses 
on yield growth over time, you are right. You are adding about 
2 bushels per acre per year on that, and over time that means a 
lot of acres. I think, sort of growth over say a 10 year period 
is probably equivalent to bringing in about--I am doing the 
math quickly in my head, but 4\1/2\, 5 million acres at current 
yields.
    And so over the longer run, you are absolutely right. With 
the more yield growth you are essentially being able to account 
for that increase in biofuel production.
    Mr. King. Okay, and then if I would just run some numbers 
out of my head, when I was a kid, 80 bushels of corn was a 
respectable crop. Today 240 bushels is a respectable crop. 
Monsanto put out some numbers that they project three to four 
percent increase in yields annually up to 300 bushels. Beyond 
that they don't predict. So what do we have? Triple the yields 
that we had in the last, let us say, 50 years.
    And so under this assumption I see no assumption made for 
acres consumed for cotton or non-food crops, and I hope that 
the rural population growth is factored into this as well. But 
we have about 3.2 billion bushels of corn that we have 
committed to corn ethanol, and I am looking at the language 
coming out of the CARB operation in California, it looks like 
its protectionist language to me for a state to set up 
protectionism.
    And, this presumption that has to underlie what I am 
hearing here today, and is in the report presumably and in some 
of this testimony, is that if we took those acres out of 
production that we are using to produce the 3.2 billion bushels 
of corn that will soon be up to perhaps 5 billion bushels of 
corn to reach our 15, that there would be old-growth forests 
that would be reforested in Brazil.
    I mean, isn't that the antithesis of this presumption that 
trees are being taken out in Brazil if we use corn to convert 
to ethanol? Isn't the inverse of that then you have to also 
have a presumption in your calculation that there would be 
forest growth that would regrow if we took it out of 
production?
    And I just think there are too many factors involved here, 
but I would like to hear what you have to say.
    Dr. Glauber. Well, let me just say about the carbon 
sequestration or the growth of carbon in old-growth forests. I 
don't have the numbers in front of me either, I might add, but 
you are right. Old-growth forests add very little carbon from 
year to year.
    The real issue is whether or not those forests are cut 
down, and then that is the real issue that is behind the 
analysis, that once the forests are harvested, there is a huge 
pulse of carbon by virtue of that harvest.
    But you are absolutely right in terms of it is that issue 
that really makes the difference here in terms of these 
estimates. In terms of the greenhouse gas emissions are the 
emissions on any sort of increase in land. I think that is 
behind the analysis presented in their proposal.
    Mr. King. I thank you, Dr. Glauber and Ms. Oge. I 
appreciate your testimony.
    Mr. Chairman, I appreciate the extra minute.
    The Chairman. The chair thanks the gentleman and recognizes 
the gentleman from Pennsylvania, Mr. Thompson.
    Mr. Thompson. Thank you, Mr. Chairman, Mr. Ranking Member. 
I appreciate the opportunity to have this discussion.
    I come from an energy-rich district. Actually, we drilled 
for oil the first time commercially in the world 150 years ago 
this August, but we are sitting on the third largest, world's 
largest play of natural gas, coal, ethanol plants, and timber, 
and specifically 513,000 acres, the Allegheny National Forest. 
So actually at the risk of replowing ground that was covered by 
the Ranking Member, I wanted to just follow-up, Ms. Oge, on the 
biomass definition within the RFS2 that excludes material taken 
from Federal lands specifically, and I have significant 
concerns about that. I have 513,000 acres, and we are not 
talking about standing timber. You know, there is a lot of 
timber that is just rotting on the ground that would be great 
fuel stock. And frankly, it is good fuel stock because it is 
contributing across the nation to wildfires.
    And as the Ranking Member made reference to, I mean, the 
data, the scientists are pretty clear that humans are 
contributing, I guess, four percent human activity towards 
CO2 emissions, and wildfires I have seen data that 
shows it at ten percent.
    And so the exclusion of the Federal lands, actually, really 
appears to be contributing towards the CO2 emissions 
and completely contrary. And so just briefly my question is in 
your analysis and responsibility to protect the environment, 
what is the rationale for that provision within this rule?
    Ms. Oge. Sir, again, what we are trying to do under EISA is 
to interpret the Congressional intent and do it in a way that 
would forward that regulatory proposal that is legally 
defensible. So if EISA excludes Federal land, biomass from 
Federal land, we have to respect that exclusion and interpret 
that the way that Congress intended.
    Now, I understand the issues that you are raising, but, 
again, that goes beyond the work that we have to do in 
implementing what Congress passed, the President signed to a 
law, and we have to interpret it into regulations.
    Mr. Thompson. And as it applies to this specific rule, now, 
in terms of the overall responsibility and the mission of the 
EPA. However, in terms of protecting the environment, it would 
appear to me and what would be your analysis that should have 
that been a provision within this rule in terms of accessing 
that biomass resource that is accumulating on the forest floor. 
It is contributing towards wildfires and in the end 
contributing significantly well beyond what humans contribute 
to CO2 emissions?
    Ms. Oge. On the issue of potential wildfires, we had an 
extensive discussion on that issue, and we are seeking public 
comments to what extent those areas that potentially pose risks 
from fire should be included as part of this, and we are 
looking forward for the public comments.
    Mr. Thompson. I am looking forward to weighing in on that 
conversation myself.
    Dr. Glauber, just very briefly, the USDA and the Department 
of Forest Services manages that resource with our national 
forests. It comes under that jurisdiction. Does the USDA 
support that this proposal represents the proper management and 
use of available national forests biomass resource?
    Dr. Glauber. Well, thanks. First let me just say I agree 
with what you say in terms of the implications of excluding 
Federal lands and the narrow definition on private forests. I 
think both of those miss an opportunity, both in terms of 
promoting biomass from those areas, but also encouraging better 
forest management policies.
    The problem, as Director Oge was mentioning, is the 
definition in the Act, and I think there is a question of how 
broadly can you interpret a definition that is fairly narrow 
frankly, and it is a concern. And as you know, there was a 
great debate over it during the energy bill itself, and I am 
pleased that when we did the farm bill at least that the farm 
bill did include a much broader definition.
    But the real problem is the definition in the Act itself.
    Mr. Thompson. I would agree with that.
    I yield back my time. Thank you.
    The Chairman. The chair thanks the gentleman and recognizes 
the gentlewoman from South Dakota.
    Ms. Herseth Sandlin. Thank you, Mr. Chairman, and I would 
like to say to my colleague from Pennsylvania, I enjoyed 
working with your predecessor on this issue and will look 
forward to work closely with you. The only exception I would 
take to what Dr. Glauber just said is that there wasn't a 
debate on that definition during the energy bill. That was the 
problem. It was a narrow definition stuck in the 11th hour--
right. Controversies surrounded it in the days following and we 
have a bill that we will share with you that seeks to change 
the definition. Certainly the definition in the farm bill is 
better than what we had in the energy bill. We think the 
definition in my bill is even better, and so we will continue 
to work with Members in a bipartisan way on this Committee to 
make that change to allow both EPA and USDA to go forward as 
well as Department of the Interior with the analysis that we 
think should be done as it relates to biomass resources across 
the country.
    Ms. Oge, there have been a lot of questions on the indirect 
land use changes, and I want to focus on the domestic versus 
the international analysis. It is my understanding that 
producers asked EPA to clearly separate in its proposed rule 
the domestic and the international indirect affects attributed 
to corn ethanol and biodiesel, but in the end the rule doesn't 
provide that transparency that was requested.
    Is it correct that EPA did not break out the domestic and 
international indirect effects?
    Ms. Oge. No, it is not correct. We did provide for that 
transparency. Again, this regulatory package is extensive. I 
don't remember exactly the page that this information appears, 
but we have provided it for the purpose to be transparent, 
which we believe is very important----
    Ms. Herseth Sandlin. Well, let me----
    Ms. Oge.--the percent of greenhouse gas emissions that come 
from domestic activities versus the international land use 
impact.
    Ms. Herseth Sandlin. Okay. Well, we are still in the 
process of reviewing the lengthy proposed rule and that 
analysis. So we will keep looking for that information, and if 
you do have a page that you can point us to that clearly sets 
forth how you broke out the domestic and international 
analysis, that would be helpful.
    Ms. Oge. I would be glad to do that.
    Ms. Herseth Sandlin. Thank you. Can you also, based on the 
charts that the EPA released yesterday, we have calculations of 
emissions for grain-based ethanol over both a 100 and a 30 year 
period. Now, Dr. Glauber notes in his written testimony that 
the scientific literature on biofuels production and 
international land use has been written basically in the last 5 
years, and I would add in a very highly-politicized environment 
with a lot of misinformation circulating.
    And so if you could answer, and you may want to take these 
for the record because my time will be down here shortly, but I 
want to understand how EPA resolved some key issues relating to 
calculating land use changes. And specifically I would like to 
point to Dr. Glauber's testimony and the section entitled, 
Sources of Uncertainty so that you could provide, Ms. Oge, 
specifically how the EPA decided yields on converted lands, 
shifts between different land uses, yield growth over time, the 
substitutability of dry distiller grains, and how to treat a 
variety of modeling assumptions, including assumptions about 
changes in fertilizer use.
    So, again, many of us are concerned, and we appreciate that 
the EPA is going to subject its own analysis to peer review, 
and in the time I have remaining, if you could just take those 
for the record, if you could explain in more detail how the 
peer review process for these models is going to work.
    Ms. Oge. Yes.
    Ms. Herseth Sandlin. How will members be named, based on 
what criteria, and what timeline will it have for reaching 
conclusions, and how often do you anticipate a review of the 
models?
    Ms. Oge. I would be glad to do that. But very briefly on 
your first question, a lot of the inputs, the yield 
improvements, the acres that we expect to be used in the United 
States, and there was a question earlier, we believe very few 
new acres will be needed for the 15 billion gallons of corn 
ethanol. All this input comes from USDA for these models but we 
would be glad to respond back to you in writing.
    On the peer review there are four broad elements that we 
are seeking peer review for. One of the most important elements 
of this analysis that brings along the controversy is the use 
of satellite data for the international land use. We have used 
NASA satellite data from 2001 to 2004 timeframe that provides 
historic empirical data of how countries like Brazil have made 
decisions to move to forestland versus pastureland.
    So that is a very critical element of the analysis. So we 
will do peer review of that, along with the peer review of how 
we have put together the three models; actually, four models.
    The peer review process is the guidelines that we are 
using, EPA guidelines, Office of Management and Budget 
guidelines as how to have a third party make decisions of what 
experts that need to be brought into the peer review process. 
We hope now that the public record is in place, we have started 
the process for peer review, and we hope that the peer review 
process will be completed hopefully by the end of June. And we 
will be publishing the peer review results of that effort.
    The Chairman. The chair thanks the gentlewoman and 
recognizes the gentleman from Louisiana, Mr. Cassidy.
    Mr. Cassidy. Great thing about going last is that most of 
your questions are answered.
    That said, I do want to learn some more on this, and some 
of this you may not be able to tell me. For example, obviously 
what you decide could have tremendous impact, potentially, upon 
cap-and-trade. If you say you are taxed for the amount of 
emissions that your industry creates in the cap-and-trade 
system effectively. If it is an international issue, okay, so 
we don't have to plant more farmland, but they have to deforest 
the Amazon to produce more sugarcane or corn or whatever. Does 
that impact the tariff paid by our producers under the proposed 
cap-and-trade system? You may not know that but that comes to 
mind.
    Ms. Oge. Another office of EPA has been responsible in 
evaluating the overall cost to our domestic industry from all 
sectors for the Congressman Waxman bill, so I cannot speak to 
the methodology that they have used. But, I am pretty certain 
that the oil industry, the refiners, including the input now 
that we are getting from the renewable fuel producers, they 
will have another cap as part of the industry-wide cap-and-
trade. To what extent the cost of that has been addressed with 
what is going to happen in the global way, I really cannot 
answer that question for you.
    Mr. Cassidy. Second, the California standards, have they 
been peer reviewed?
    Ms. Oge. We have worked very closely with the State of 
California in their efforts for their low-carbon fuel. The 
methodology that we are using in looking to the other phases of 
the lifecycle is the same methodology that they are using. 
However, they are using different economic models than we have 
used.
    I cannot answer to what extent their work has been peer 
reviewed. I do know that they had a board meeting about a week 
ago in California where the board reviewed the work that was 
done by the State of California. And my understanding is that 
they will continue looking at a number of issues that came up 
from the review process that they have undertaken for the next 
couple of years.
    Mr. Cassidy. And so I understand, obviously, fertilizer is 
part of taking increasing yields, so in your modeling if they 
use increased fertilizer, I presume that that would be included 
among your indirect costs?
    Ms. Oge. Well, the use of fertilizer is used not merely 
just for cost but as part of the greenhouse gas emissions.
    Mr. Cassidy. Yes.
    Ms. Oge. We are using what we believe is the best data 
today, but this is another component of the analysis that we 
are going to peer review in the next 60 days.
    Mr. Cassidy. I am also a freshman that never really looked 
in detail at how you report, but you mentioned that there is 
variability with things such as land use and et cetera. But I 
presume that you report with confidence intervals. Correct? A 
range of values that on a low end and a high end, depending 
upon these variables. Is that a correct assumption?
    Ms. Oge. The analysis as we have done, we are calling them 
uncertainty or sensitivity analysis so we have a number of 
scenarios, especially on elements of the analysis that have the 
most important impact for the greenhouse gas emissions, which 
is the international land use. So we have made a lot of 
sensitivity analysis.
    For example, we assume based on satellite data that about 
four percent of forests will be the land that Brazil is going 
to use. Four percent will come from forests. The remaining will 
come from pastureland, to make up for the difference of the 
corn exports that will not leave from the states and another 
country would have to make it.
    As Dr. Glauber said, that four percent, although it is very 
low, it is extraordinary crucial because that is where you get 
most of the increases of greenhouse gas emissions. So we have 
that sensitivity analysis. What if it was zero percent of 
forest? What would that land use impact be?
    So all this sensitivity analysis have been laid forward for 
public comments.
    Mr. Cassidy. Thank you very much.
    The Chairman. The chair thanks the gentleman and also would 
just like to say to our witnesses that Chairman Peterson told 
me that he was riled up, and he wanted to make a statement, and 
he certainly did that. And Ranking Member, Mr. Goodlatte and I 
have been serving on this Committee with Chairman Peterson for 
over 16 years, and he has never been shy about what has been on 
his mind. But, that is about the most direct frustration that I 
have seen in over 16 years coming out of his mouth.
    And I would just like to say that I share his frustration, 
and from the comments and questions that you received here 
today from Members on both sides of the aisle, because this is 
a very bipartisan full Committee and very bipartisan 
Subcommittee, that we are very concerned about the path that we 
are going down, and we want you to take that message back loud 
and clear.
    We thank you for your testimony.
    If the Ranking Member has something to add?
    Mr. Goodlatte. No. I would just add one thing, and that is 
in addition to the frustration about how this process has 
evolved and what has come forward, I would have to say that the 
many arbitrary restrictions in the RFS, including those that 
would allow use of planted trees or crops from land if it was 
cropped prior to passage of EISA, would seem to create an 
implementation nightmare. And if it becomes necessary to track 
what lands crops came from, or whether a tree was planted or 
naturally regenerated, and I just believe that both USDA and 
EPA are going to have an implementation problem with these 
regulations if you pursue the path that you have set yourself 
on to this point.
    So I hope, again, that you will not only listen to our 
comments but the multitude of comments I am sure you are going 
to receive from others and listen to them before you implement 
anything that is going to be Orwellian; as the process you are 
embarked upon right now in trying to determine where and how 
something was generated to create the fuels that are necessary 
for our country.
    We want to be encouraging production of all sources of 
energy in this country, not discouraging them through 
regulatory nightmares.
    Thank you, Mr. Chairman.
    The Chairman. The chair thanks our witnesses and will call 
panel two.
    Dr. Bruce A. Babcock, Director, Center for Agricultural and 
Rural Development, Iowa State University; Mr. R. Brooke 
Coleman, Executive Director of New Fuels Alliance, Boston, 
Massachusetts; Mr. Nick Bowdish, General Manager, Platinum 
Ethanol, Arthur, Iowa; Mr. Manning Feraci, Vice President of 
Federal Affairs, National Biodiesel Board; Mr. Michael Pechart, 
Deputy Secretary for Marketing and Economic Development, 
Pennsylvania Department of Agriculture; and Ms. Anitra Webster, 
family forest owner on behalf of American Forest Foundation, 
Lynchburg, Virginia.
    Dr. Babcock, when everyone is seated, you may begin your 
testimony.

       STATEMENT OF BRUCE A. BABCOCK, Ph.D., PROFESSOR OF
   ECONOMICS AND DIRECTOR, CENTER FOR AGRICULTURAL AND RURAL 
          DEVELOPMENT, IOWA STATE UNIVERSITY, AMES, IA

    Dr. Babcock. Thank you, Mr. Chairman, Mr. Goodlatte, for 
the opportunity to participate in today's hearing.
    During the last 18 months my research center has worked 
with EPA to enhance their ability to determine if biofuels meet 
the greenhouse gas performance thresholds of the new RFS. EPA 
needs to estimate how diversion of corn and vegetable oil to 
fuel, biofuels will change agricultural production around the 
world. Thus, EPA naturally sought out researchers who could 
help them answer this question, since they had little expertise 
in this area.
    Diversion of corn from feed to fuel increases the price of 
corn. One response to this price increase is that more corn 
will be produced. In the United States increased corn comes 
primarily from a reallocation of land away from other crops. In 
addition, some land that was not previously landed for corn has 
been brought into production.
    Other countries will also alter their crop mix, and the 
cultivation of new land will also increase, and this 
cultivation of new land does release CO2 from the 
stock of carbon in the soil and on the plant biomass. This 
release of CO2 in response to higher corn prices is 
logically attributable to expansion of the U.S. corn ethanol 
production.
    Thus, Congress and the California legislature have some 
justification for wanting to account for the CO2 
emissions caused by price-induced changes in land use when 
determining whether expansion of biofuels increases or 
decreases CO2 emissions.
    The key question is whether we can accurately predict how 
U.S. biofuels policy will affect land use both here and abroad. 
Our ability to estimate changes in acreage devoted to U.S. 
crops due to price changes is reasonably good because we have 
been doing this for about 30 years. Our ability to estimate 
changes in agricultural production overseas is less precise. 
The reason is that there is the sheer number of agricultural 
sectors around the world that need to be well understood and 
modeled.
    The ability to estimate the dynamics of agricultural land 
use is even more limited. For example, the model that 
California uses to estimate land use changes from biofuels 
predicts that about half of the expansion in cropland from corn 
ethanol in the U.S. comes from cutting down forests. The other 
half comes from conversion of pasture.
    However, over the last 3 years we have seen little evidence 
that U.S. trees are being cut down to produce ag land. Rather 
than conversion of forests and existing pasture, U.S. cropland 
has increased primarily through some reduction in CRP and 
through increased double-cropping of soybeans after wheat.
    Our ability to accurately measure how other countries will 
expand their agricultural land is limited by a lack of 
available data and a lack of knowledge about what is actually 
going on in those countries. For example, both California and 
EPA conclude that increased crop prices from biofuels' 
expansion will increase deforestation in the Amazon. This seems 
logical because increased demand for cropland is largely met by 
pasture conversion, and unless the Brazilian cattle herd 
shrinks, it would seem that the decrease in pasture would have 
to be made up somehow. Well, where is Brazil going to get more 
pasture? Well, by converting Amazon forest in savanna. Thus, 
the argument goes. Any increase in Brazilian cropland leads to 
deforestation and a loss of savanna.
    But there is scant evidence that increased production of 
crops has been the primary culprit in the loss of Amazon 
forest. Certainly cattle and pasture have both increased in the 
Amazon since 1996, but was that due to the 36 percent increase 
in Brazilian cropland or to the 30 percent increase in the 
cattle herd in Brazil?
    With help from a research center in Brazil we are only now 
beginning to sort that out. Preliminary data suggests that a 
significant portion of the increase in cropland since 1996, in 
the major crop-producing regions of Brazil, was accommodated by 
increasing the cattle stocking rates. Further analysis is 
needed before we can state with confidence how much of the 
pasture created in the Amazon was created by crop pressure 
rather than by increased herd size.
    Well, why does this matter? Well, nobody believes that 
expansion of U.S. corn ethanol is going to increase cattle herd 
in Brazil. Rather, higher crop prices will probably lead to 
some increase in cropland. If the Amazon forest was cut down to 
accommodate increased cattle numbers and increased stocking 
rates accommodate increased cropland, then the primary impact 
in Brazil of increased crop prices will be intensification of 
cattle production, not loss of savanna and Amazon forest.
    The precision with which lifecycle analysts can estimate 
greenhouse gas emissions associated with growing, transporting, 
and processing feedstock is high. The precision with which 
models can estimate CO2 emissions associated with 
price-induced land use change is low.
    If Congress and individual states want to be able to 
estimate how expanded production of biofuels changes greenhouse 
gas emissions, then significant improvements are needed in our 
understanding of the dynamics of crop and livestock production 
outside the United States. My center is investing heavily in 
improving our understanding of Brazilian agriculture to better 
enable EPA to conduct this analysis.
    I anticipate we will be replicating this effort for other 
major producing countries. Without this kind of effort it is 
impossible to conclude with any certainty the extent to which 
increased emissions from land conversion offset the decrease in 
emissions from using renewable fuel in our transportation 
sector.
    [The prepared statement of Dr. Babcock follows:]

 Prepared Statement of Bruce A. Babcock, Ph.D., Professor of Economics 
and Director, Center for Agricultural and Rural Development, Iowa State 
                          University, Ames, IA
    Thank you, Mr. Chairman, for the opportunity to participate in 
today's hearing.
    My research center has worked on the economics of biofuels for the 
last 4 years. During the last 18 months, we have worked with the 
Environmental Protection Agency (EPA) to enhance their ability to 
determine if biofuels meet the greenhouse gas performance thresholds of 
the new RFS. We have a global production and trade model that has been 
used for analysis of farm and trade policies for the last 25 years. The 
model tracks the impacts of policy changes on world agriculture, 
including estimates of the change in supply and demand for agricultural 
products. Because EPA is charged with estimating the extent to which 
increased diversion of corn from feed to fuel will cause changes in 
agricultural production around the world, they naturally sought out 
researchers who could help them answer this question.
    Increased use of corn to produce ethanol causes the price of corn 
to be higher than it otherwise would be. Both U.S. and foreign 
producers will respond to this price increase. Economic theory and the 
reality of the market suggest that one response to the price increase 
will be increased production of corn. In the United States the primary 
mechanism for increasing corn production has been through a 
reallocation of land. A secondary mechanism has been to convert land 
that was not previously planted and to plant corn or some other crop on 
it. Other countries will also alter their crop mix and will use more 
land to increase production in response to higher prices. The 
conversion of grassland or forests that would not have been cultivated 
but for higher corn prices releases CO2 from the stock of 
carbon both in the soil and in the biomass. This release of 
CO2 in both the United States and around the world in 
response to higher corn prices is logically attributable to expansion 
of U.S. corn ethanol production. Thus, Congress and the California 
legislature have good justification for wanting to account for 
emissions caused by market-induced changes in land use when determining 
whether expansion of biofuels will increase or decrease global 
greenhouse gas emissions. The key question is whether we can accurately 
predict how an expansion of U.S. biofuels will affect land use both 
here and abroad.
    Our ability to estimate changes in agricultural land use in the 
U.S. due to a change in biofuels policy is reasonably good because we 
have been doing this for about 30 years. For example, another model 
called GTAP that is used to estimated land use changes from biofuels 
predicts an expansion of 250,000 acres per billion gallons of corn 
ethanol. My center's model predicts 300,000 acres per billion gallons 
of ethanol.
    Our ability to estimate land use changes overseas is less precise. 
For example, my center's estimates are currently about 700,000 acres 
per billion gallons overseas. GTAP estimates about 400,000 acres per 
billion gallons. One reason why it is more difficult to estimate 
changes in foreign land use is the sheer number of agricultural sectors 
in all countries that need to be well understood and modeled. A second 
reason is that lower quality and availability of data in other 
countries relative to U.S. data makes it more difficult to estimate how 
land use will change.
    The ability to estimate how countries would expand their 
agricultural land is quite limited. My center does not yet estimate 
land conversion from forest, but GTAP estimates that about half of the 
predicted expansion in cropland from corn ethanol in the United States 
comes from cutting down existing forests. However, over the last 3 
years, we have seen little evidence that U.S. trees are being cut down 
to produce more agricultural land despite the fact that U.S. cropland 
has expanded by 8 million acres. We have also seen no evidence that 
significant acres of pasture have been converted, other than a drop in 
Conservation Reserve Program acres in the Dakotas. Rather than 
conversion of forest, as predicted by GTAP, U.S. cropland has increased 
primarily through a reduction in CRP acres and through increased double 
cropping of soybeans after wheat.
    Our ability to accurately measure the extent of land use changes 
outside the United States is limited because of a lack of reliable data 
and a lack of knowledge about what is actually going on in other 
countries. For example, the California Air Resources Board (CARB) and 
EPA conclude that increased crop prices from biofuels expansion will 
increase deforestation in the Amazon in Brazil. This conclusion seems 
logical because increased demand for cropland in Brazil is largely met 
by converting pasture to cropland. Unless the Brazilian cattle herd 
shrinks, it would seem that the decrease in pasture would have to be 
made up somehow. Where is Brazil going to get more pasture? By 
converting Amazon forest and savanna. Thus, the argument goes, any 
increase in Brazilian cropland leads to deforestation and a loss of 
savanna.
    EPA and CARB both heavily penalize biofuels because of the presumed 
loss of the carbon stocks in forests and savannah in Brazil. The 
existing scientific literature also concludes that expansion of 
biofuels in the United States will lead to deforestation. But what 
evidence is there that increased production of crops has led to 
expansion of pasture in the Amazon? There is evidence that cattle 
numbers and pasture have both increased in the Amazon region since 
1996. But was that due to the 30 percent increase in the Brazilian 
cattle herd or due to the 36 percent increase in Brazilian cropland 
under cultivation? We are only now beginning to sort that out, and 
preliminary data suggest that a fairly large proportion of the increase 
in cropland in the major crop-producing regions of Brazil was 
accommodated by increasing cattle stocking rates. Further analysis is 
needed before we can state with confidence how much of the pasture 
created in the Amazon was created by crop pressure rather than by 
increased herd size in Brazil. Why does this matter? Nobody believes 
that U.S. biofuels policy is going to lead to increased cattle numbers 
in Brazil. Rather, increased crop prices will increase cropland. If 
Amazon forest is getting cut down to accommodate increased cattle 
numbers, and increased stocking rates accommodate increased cropland, 
then the primary impact in Brazil of increased crop prices will be 
intensification of cattle production: not loss of savanna and Amazon 
forest.
    The precision with which lifecycle analysts can estimate the 
greenhouse gas emissions that are associated with the growing, 
transporting, and processing of the feedstock is relatively high, 
although the estimates are quite sensitive to the assumptions being 
used. The precision with which models can estimate emissions associated 
with market-induced land use changes is low. If Congress and individual 
states want to be able to estimate with any degree of confidence how 
expanded production of biofuels changes greenhouse gas emissions, then 
significant improvements are needed in our understanding of the 
dynamics of crop and livestock production around the world. My center 
is investing heavily in improving our understanding of Brazilian 
agriculture to better enable the EPA to conduct its analysis. I 
anticipate that we will be replicating this effort for other major 
producing countries. Without this kind of hard labor and data-intensive 
work, it is impossible to conclude with any certainty the extent to 
which increased emissions from land conversion offset the decrease in 
emissions from using a renewable fuel in our transportation sector.

    The Chairman. Thank you, Dr. Babcock.
    Mr. Coleman.

 STATEMENT OF R. BROOKE COLEMAN, EXECUTIVE DIRECTOR, NEW FUELS 
                      ALLIANCE, BOSTON, MA

    Mr. Coleman. Mr. Chairman, Members of the Subcommittee, 
thank you for the opportunity to speak today. I submitted a 
written testimony that is longer in length, and I am going to 
change from that script a little and do something that is 
either incredibly unambitious or ambitious, and that is just to 
describe to you what the difference between a direct and 
indirect effect is, because that is a critical part of moving 
forward with this debate.
    First, a little bit of framing. What are we talking about 
here? I think we have been over the fact that this was a clause 
that was in the Renewable Fuel Standard, but a lot of other 
agencies have taken the ball and run with it, and I want to 
make sure to properly frame it.
    The California Air Resources Board added indirect land use 
change to the biofuel score in California. That increased 
biofuels anywhere from 40 to 200 percent in the relative carbon 
score to other fuels that did not pay for indirect effects. If 
you want to know why the biofuels industry is concerned about 
this number, that is it.
    Just yesterday the preliminary rule was released at EPA. 
You might notice one particular thing. Corn ethanol, just 
taking one fuel out of the mix there, corn ethanol is about 60 
percent better than petroleum based on direct effects. When you 
add indirect land use change, that benefit shrinks to 16 
percent better. And so we are talking about very real changes 
that could have very real commercial implications.
    So I want to talk about direct versus indirect emissions. 
One of the things that we skipped over is what is included in a 
direct effect. Direct effect basically means well to wheels, 
cradle to grave, whatever you want. It is all of the carbon 
emissions that are emitted during the production and use of a 
fuel. So for biofuels that means that the land, the pasture 
cleared to produce corn, the fertilizer used and the gasoline 
used to cultivate the land, moving the product to the 
biorefinery, emissions at the biorefinery, moving the finished 
product to the retailer, wholesale site, and then combusting it 
in a car.
    And so if that is a robust sort of analysis of what carbon 
emissions come from production and use, what the heck is an 
indirect effect? And, proponents that have been including 
indirect effects in the carbon score of a fuel argue that these 
effects are also part of the carbon footprint of a gallon of 
fuel, and whether you are for or against indirect effects, that 
is not true. Because any time you are talking about indirect 
effects, you are talking about market-mediated, economically-
derived, behaviorally-induced effects that are often occurring 
far in the distance somewhere else in the marketplace. It is 
basically a fancy term for ripple effects.
    And there are two examples that are perhaps over-simplistic 
but frame the difference. The first is let us say you buy a 
Prius. You go out, and what is the direct effect of buying a 
Prius? Well, you are going to use less fuel, and you are going 
to have less carbon emissions that come out of the tailpipe. 
That is the direct effect. No one is arguing over that.
    What you are also going to have is you may drive slightly 
more because it is cheaper for you to drive, you might spend 
your extra money on something else like a trip to Paris or a 
flat screen TV that emits more carbon emissions. And then it 
gets really complicated when you think to yourself, if 
everybody buys Priuses, you are going to have the price of fuel 
going down, and then everybody is going to pull their SUV out 
of their garage and drive around. Okay. The question is not 
what is the magnitude of the effect. The question is do we add 
that effect to the carbon score of a Prius. That is a public 
policy question.
    Second example that is made up here distinctly for you, 
suppose Congress comes forward and says, we resolve to offset 
our carbon emissions every time we get on a plane and go back 
to our home district. Intuitively Members of Congress are going 
to say, ``Okay. I will pay for my portion of the plane ride. If 
I am on a plane with 100 people, I am going to pay for \1/100\ 
of the emissions that come out of the plane.'' Okay, that is a 
direct effect, and I think we are all okay with that being our 
rule.
    What the indirect effects would be is if you were also 
asked to pay for the person that was going to sit in your seat 
and had to take another mode of transportation to get wherever 
they are going. That is the displacement effect. So should you 
have to pay for the other guy's or woman's carbon effect on 
another plane or not? That is the indirect effect.
    Now, bringing this full circle with 50 seconds to go here, 
this is what indirect land use change is. It is not the land 
used to produce biofuel feedstock. It is the land needed to 
produce another agricultural product, say food, say in Brazil, 
because biofuel theoretically pushed that product to another 
place. So assigning a penalty to biofuels for indirect land use 
change, whether you like it not, is penalizing biofuels for the 
land expansion that occurs as a result of the cumulative impact 
of the agricultural sector.
    And so that raises obvious questions. Also whether you like 
it or not, when you say the word, indirect, you are moving the 
carbon emissions from product A to product B. There is no way 
around it, and the reason is, is because the cumulative land 
impact of the entire agricultural sector is an accumulation of 
everybody's direct effects. And so you can't have a situation 
where people pay for direct and indirect effects because then 
the sum of all the parts equals more than the whole.
    And I would encourage people to think about that from a 
cap-and-trade perspective. How do you trade someone else's 
carbon footprint? How are you accountable for it? Can you 
change it? Can you mitigate it? What type of message does a 
public policy send for someone overseas in that particular 
situation.
    So I would like to close very quickly by framing this as 
sort of a dialogue between what is becoming two extremes. On 
the extreme side, is the side that says we have to throw all 
this stuff out. It is all completely insane. That is tempting. 
I have had a couple of nights where I think the exact same 
thing.
    However, the other extreme is that we need to pretend that 
indirect effects are part of the carbon score and just add them 
on like they did in California. And that means that we are 
basically saying we are going to add soybean production in 
Brazil that might end up in food on a plate in Italy to a U.S. 
biofuel company's carbon score and then go make them compete 
with other companies. And oh, by the way, we are not going to 
do that for petroleum. That is the other extreme, and that is 
the position being espoused by a lot of environmental groups 
out there.
    So what I would like to do, and what we need to do is two 
things. One, get back to comparing apples to apples. The 
problem with the 16 percent number with EPA, is it compares 
biofuels, paying for direct and indirect effects, to petroleum 
only paying for direct. That is not the right number if that is 
the case.
    And the other thing is that indirect effects have a role to 
play. They can inform good policy. You can score fuels based on 
direct effects, turn around and say, I am going to look at the 
indirect effects for all these different fuels, so I better 
understand, for example, how much conventional biofuel we can 
use before we send ripple effects that are of concern to us 
through the marketplace. Inform public policy but don't add it 
to the carbon score.
    Thank you very much.
    [The prepared statement of Mr. Coleman follows:]

Prepared Statement of R. Brooke Coleman, Executive Director, New Fuels 
                          Alliance, Boston, MA
    Mr. Chairman and Members of the Subcommittee, thank you for the 
opportunity to submit this statement in review of the indirect land use 
provisions of the Federal Renewable Fuel Standard (RFS). My testimony 
today will focus on indirect effects.
    My name is Brooke Coleman. I am the Executive Director and founder 
of the New Fuels Alliance, a not-for-profit national advocacy group for 
the production and use of non-petroleum fuels, with a particular focus 
on biofuels. At its core, the New Fuels Alliance is a coalition of 
biofuel producers, largely advanced biofuel producers, working in 
collaboration with communities and the private sector toward increasing 
the production and use of bio-based fuels.
    I have been an advocate for biofuels for more than 10 years, first 
as the climate director for an environmental group in California called 
Bluewater Network and later as the director of several coalitions in 
support of pragmatic approaches to reducing our dependence on foreign 
oil. I have seen the pendulum swing on biofuels several times, from the 
extremes of claims about biofuels completely replacing gasoline to 
biofuels being responsible for rainforest destruction and depriving the 
world's hungry of food. There is a reasonable center on many of these 
issues, even if we don't spend a whole lot of time discussing biofuels 
in that context.
    With time limitations in mind, I would like to start by speaking 
directly to an issue that is becoming more and more controversial; that 
is, our new foray into what are called indirect carbon effects. It 
seems that we are going to have to resolve this issue as we move 
forward with biofuel policy, and so the subject of this hearing and the 
timing of it are ideal.
Where did the issue of indirect effects originate?
    As you know, the amended Federal Renewable Fuel Standard passed in 
December 2007 requires new biofuels to be 20-60% better than gasoline 
to be eligible for the program. Late in the process, a clause was added 
to the definition of lifecycle carbon emissions, calling for the 
inclusion of indirect effects such as indirect land use change. This 
came several months before the public debate about indirect land use 
change even started, in February 2008, and before a substantive review 
of indirect effects occurred at the policy or scientific level.
    Two weeks ago, the California Air Resources Board added indirect 
land use change penalties to the carbon score of biofuels under the 
recently adopted Low Carbon Fuel Standard (LCFS)--a standard being 
considered for adoption by 11 northeastern states and the Federal 
Government via Congressman Waxman's climate change (cap and trade) 
legislation.
    Proponents of indirect land use change tend to cast their critics 
as somehow insensitive to rainforest degradation or swayed by the 
powers of the ethanol lobby. In reality, there are legitimate questions 
to be asked and answered about the unprecedented decision to start 
adding indirect carbon effects to the carbon score of any product, 
including but not limited to biofuels.
    While the assessment and discussion of indirect effects is 
complicated, my statement today focuses on the basic questions.
What is an indirect carbon effect?
    Proponents of including indirect effects in the carbon score of a 
fuel argue that these effects are a part of the fuel's carbon 
footprint. However, whether you are for or against indirect effects, 
this is not really true. Anytime you are talking about something 
``indirect'' in the carbon world, you are talking about a market-
mediated, economically or behaviorally induced, carbon effect, which is 
a fancy term for ``ripple effects'' in the marketplace occurring, in 
most cases, far from the point of production or use of the product.
    Put another way, it is the change that could occur in the 
marketplace stemming from, but not as a direct result of, using a 
product. Consider the following two examples:

   Let's say you buy a more fuel efficient car; a Prius. The 
        direct effect of using that car will be less fuel use and as a 
        result less carbon emissions. That is the direct effect. The 
        indirect effect, however, may be that you drive slightly more 
        because it's cheaper to drive, and then turn around and use the 
        savings to buy a flat screen TV, which emits more carbon 
        emissions than a regular television when manufactured and used. 
        Even more confusing, if everyone starts driving more fuel 
        efficient cars, there will be less fuel demand and the price of 
        fuel will drop; this will also lead to more driving. Should we 
        attach these effects to the carbon score of a Prius?

   Let's say Congress passes a resolution committing to have 
        its Members offset the carbon emissions from all their flights 
        back to their districts. Presumably, this means that each 
        Member of Congress would be charged for his or her portion of 
        the emissions coming from each flight they take. You take the 
        emissions from the plane and divide by the number of seats on 
        the plane; that is your share. That is the direct effect. The 
        indirect effect would be the carbon emissions of the person you 
        pushed onto another plane because they could not sit where you 
        are sitting. Should you pay for the other person's emissions or 
        should he?

    Bringing the issue back to biofuels, this is what indirect land use 
change is. It is not the land used to produce biofuel feedstock, it is 
the land needed to produce another agricultural product--say, food--
because biofuel theoretically pushed that product to another place. 
Assigning a penalty to biofuels for indirect land use change is 
penalizing biofuels for the land expansion that occurs as a result of 
the cumulative impact of the agricultural sector.
So how do we rationalize adding an indirect carbon effect to the carbon 
        score of a product?
    This is largely a public policy question. Why should U.S. biofuels 
be penalized for the land clearing activities of a food or fiber 
manufacturer in the Amazon? Here is a key point to consider: the only 
way to rationalize adding an indirect effect to the carbon score of a 
product, such as biofuel, is to look at the world through a purely 
``additive lens.'' You have to manually--and rather arbitrarily--
ascribe land clearing causation to a single product; in other words, 
``biofuels entering the marketplace is causing land clearing in 
Brazil'' . . . when in fact land clearing in Brazil occurs as a result 
of not only agricultural demand, but also socioeconomic, political, 
trade, law enforcement and other variables. Biofuels is not even the 
sole source of agricultural demand, much less the cause of world 
political and socioeconomic variables.
    Interestingly, this is a presumptive underpinning of the ethos of 
indirect effects because this is how indirect effects are modeled and 
enforced. Modeling indirect land use change, or any market-mediated 
effect, requires that the modelers freeze the world economy in a single 
moment in time in order to isolate the one variable being analyzed (in 
this case, increased biofuel demand). In other words, the model used in 
California to predict indirect land use change for biofuels, for 
example, is a static model that cannot properly ascribe ``proportionate 
cause'' to the myriad of variables that actually cause land use change.
    Two weeks ago, leading investors in advanced biofuels from eight 
firms wrote a letter to the California Air Resources Board raising 
concerns about this modeling. They said:

        ``Indirect land use change'' is an outcome derived by adding a 
        predetermined amount of biofuel demand to a static, preset 
        economic model, which in turn projects the potential ``price 
        induced'' expansion of the agricultural sector onto additional 
        land. It is a useful academic exercise, but as a price model it 
        cannot account for the profit margins that drive real world 
        decision making. As a result, the model is likely to over 
        estimate effects that in reality would be mitigated by market 
        forces, or produce estimates that in many cases are simply 
        wrong. For example, in prior applications of the GTAP 
        methodology, the model predicted changes in land use between 
        2001 and 2006 that were actually the opposite of the real-world 
        changes observed over time.\1\
---------------------------------------------------------------------------
    \1\ In an earlier analysis of the impact of biofuels on U.S. land 
use patterns, researchers at Purdue using GTAP concluded the harvested 
area for coarse grains like corn would increase 8.3% from 2001 to 2006, 
U.S. harvested area for oilseeds like soybeans would decline 5.8%, and 
forested area would decline 1.5% during the same period. In actuality, 
coarse grain harvested area declined by 2%, oilseed area increased by 
0.5%, and forested area increased by 0.6% from 2001 to 2006.

    More than 100 leading bio-scientists also submitted a letter to 
California, calling the science nascent and the use of it in a 
regulation premature. Remember, California's assessment of these 
penalties increased the carbon score of biofuels anywhere from 40 to 
200 percent. These are game changing carbon score increases, with real 
commercial implications. And the economic models are often 
directionally wrong and controversial from a scientific perspective.
Summary of Problems & Solutions
    There is no question that pristine land degradation is a problem in 
this and other countries. There is no question that we should be 
assessing the indirect effects of the energy choices we make. Biofuels 
could lead to more land conversion. Using electricity and natural gas 
in vehicles could lead to more coal combustion. Ongoing petroleum 
dependence could lead to all of these indirect effects, and more, given 
that the price of petroleum influences nearly every sector of the 
economy. Turning a blind eye to ripple effects is not a reasonable 
solution.
    But there is a big difference between using these assessments to 
inform public policy decisions--for example, how much conventional 
biofuel we can use before overburdening land--and pretending that: (a) 
these effects are a part of the primary carbon footprint of a given 
fuel; or, (b) that we understand them well enough to add carbon 
penalties to each gallon of biofuel used. That is where a useful 
exercise in precaution becomes misleading and polarizing.
    While considering the public policy implications of indirect 
effects, it is useful to consider the following ``big picture'' issues:

    (1) When it comes to lifecycle carbon scoring, there are really 
        only direct effects, because the indirect effect of one product 
        is the direct effect of another. If products pay for direct 
        effects, there are no indirect effects.

    (2) If the goal of U.S. energy policy is change, how useful is it 
        to arbitrarily assign the disruptive effects of an entire 
        sector to only the new entrant in that sector?

    (3) Consider the economic effects of this decision. A hectare of 
        land is cleared in Brazil to produce soybeans for food. Critics 
        of biofuels say that this land expansion occurred because 
        biofuels is causing the world agricultural footprint to expand. 
        So we saddle U.S. biofuel companies with a game changing carbon 
        penalty from someone else's supply chain that is completely out 
        of their control from a mitigation perspective.

    (4) An indirect effect is, by definition, the application of 
        someone else's direct effect to another product or fuel. Once 
        we start doing that, we are breaking down the very principles 
        we are espousing in cap and trade and polluter pays: that we 
        are responsible for our own carbon footprint and can and should 
        improve it. Do indirect effects even work in cap and trade?

    The good news is there are reasonable solutions to this complicated 
problem. I would like to propose four (4) concrete steps to address 
concerns about indirect effects:

    (1) Study them for all fuels; we need to try to understand the 
        ripple effects of the energy choices we make. The outcomes can 
        inform good policy. But the current framework--in which only 
        biofuels are being analyzed for price-induced effects--does not 
        work.

    (2) Cast a critical eye on those that insist that indirect effects 
        are part of the ``lifecycle'' carbon footprint of any product. 
        Even if you believe that indirect effects analysis is 
        important, as we do, this is not true. By definition, enforcing 
        indirect effects relies on debiting Product A for the supply 
        chain of Product B.

    (3) Use the lessons of indirect effect analysis to create a better 
        and more dynamic treatment of direct effects. For biofuels, 
        this means incentives to use idle and marginal land, research 
        into more sustainable energy crops, a regulatory mechanism that 
        incents good land use behavior instead of presuming bad 
        behavior, and limitations on certain types of alternative 
        energy solutions. For electricity vehicles this means 
        incentives to plug-in at night, when there is excess energy on 
        the grid.

    (4) Aggressively promote a better biofuel gallon. Going after first 
        generation biofuels with highly questionable carbon adders is 
        not going to expedite the production and use of the advanced 
        biofuels that will actually make land use more sustainable. 
        What the advanced biofuels community needs is the following:

      (a) Maintain a stable and durable policy; discussion about 
            reworking the RFS or replacing it with another program runs 
            investment away from advanced biofuels. Investors cannot 
            invest ahead of regulations that are constantly being 
            changed.

      (b) Create open markets. Biofuels are stuck in a market box. The 
            best way to open markets for advanced biofuels is to 
            mandate flex-fuel vehicles this year. These vehicles need 
            not run on biofuel blends, but can run on biofuel blends if 
            available. This opens up the investment horizons and demand 
            markets for those trying to commercialize new kinds of 
            fuels.

      (c) Establish and maintain a level playing field on which to 
            compete. We must get back to comparing ``apples to apples'' 
            when it comes to valuing different fuels in a climate or 
            energy security based regulation. Ascribing indirect 
            effects to only one type of fuel skews the relative value 
            of biofuels compared to petroleum.

      (d) De-risk debt financing. Biofuel refineries are project 
            financed. Advanced biofuel producers need Federal support 
            in terms of loan guarantees and other programs that 
            mitigate the inherent risk in making investments in highly 
            volatile liquid fuel markets. This is a reasonable role for 
            government, and one that will be transformative in the 
            marketplace.

      (e) Reject divisive strategies. Biofuel strategies that attempt 
            to draw lines between good and bad biofuels are not 
            productive, and are not helpful to advanced biofuel 
            companies. You would not promote second-generation wind and 
            solar by attacking the imperfections of and putting out of 
            business first generation wind and solar companies. The 
            same principle is true in biofuels.

    Thank you for the opportunity to speak today. I would be happy to 
answer any questions you may have.

    The Chairman. Thank you, Mr. Coleman.
    Mr. Bowdish.

 STATEMENT OF NICK BOWDISH, GENERAL MANAGER, PLATINUM ETHANOL, 
                        LLC, ARTHUR, IA

    Mr. Bowdish. Thank you, Chairman Holden, Ranking Member 
Goodlatte. My name is Nick Bowdish, General Manager at Platinum 
Ethanol. Platinum is a 110 MGY ethanol plant which began 
operations in October 2008.
    Prior to October of 2008, I worked for Ron and Diane Fagen 
at Fagen Incorporated. Fagen, Inc. is the largest design build 
construction company in the fuel ethanol industry.
    I appreciate the opportunity to speak to you today, and I 
want to touch on three things. First, in terms of the renewable 
biomass definition, my perspective is from a developer, from a 
construction company that built half the industry. There is no 
single factor more important than feedstock supply. I am not an 
expert on timber, I am not an expert on forests, but I can tell 
you that as an example in my testimony you have a map there 
that shows a geographic area and the detail, that we as 
developers go into, to determine whether a facility can have 
long-term success.
    If we are truly to expand the production of ethanol from 
the U.S. Corn Belt to other regions of the country, we need 
common sense policy in this provision. I support legislation 
introduced by Members of this Subcommittee, including H.R. 
1190, introduced by Representative Herseth Sandlin and others, 
to correct this definition.
    Second, in regards to indirect land use change. I recognize 
and support that in order to conduct a thorough lifecycle 
analysis of greenhouse gas emissions from biofuel, direct land 
use changes may be considered by EPA. However, it is inherently 
unfair and a disservice to public policy that EPA's rule 
examines both direct and indirect effects of biofuels but only 
direct effects of petroleum.
    If EPA proceeds to make extreme assumptions about the 
carbon intensity of biofuels, relying on an untested ideology 
called indirect land use change, and, remarkably, assumes there 
are no such indirect effects from fossil fuels, this selective 
enforcement will place biofuels at an unfair competitive 
disadvantage in the fuel market. EPA has not only missed the 
boat on this, they have missed the ocean-going vessel, 
literally.
    According to the National Corn Growers Association, it 
takes 40 percent less energy and land today to produce a bushel 
of corn compared to 20 years ago. I can personally witness, on 
my way driving to the airport yesterday to join you today, corn 
being planted to the inch. I am not talking about a foot. I am 
talking to the inch. Precision agriculture and genetic markers 
are redefining the efficiency of corn.
    Since 2001, U.S. ethanol producers, of which I am part of, 
have achieved a 22 percent drop in energy use. My second figure 
in the testimony I would call your attention to is Platinum 
Ethanol's BTU use per gallon for the month of March 2009. I 
would also call to your attention that EPA's recent analysis 
uses 30,000 BTUs, yet in my facility we achieve less than 
28,000, and others in the country that are just starting are 
down in the 25,000 BTUs per gallon range.
    I invite and encourage everyone of you and everyone of your 
constituents to come see Platinum Ethanol. Come understand the 
ethanol industry of today. Seek information and truth, not 
outdated statistics used by a few that get regurgitated in the 
media. I think it is patently indefensible that EPA is 
comparing the lifecycle analysis of biofuels to that of 
petroleum in 2005, since the carbon footprint of biofuels is 
only getting better, yet the carbon footprint of petroleum is 
only getting worse.
    Indeed, if the indirect greenhouse gas emissions of 
biofuels are counted towards the carbon footprint, so should 
the indirect emissions associated with petroleum. To do 
otherwise is not a comparison. It is political tampering to 
push a minority ideology. I feel strongly that if ethanol and 
gasoline both had indirect effects considered, ethanol would be 
the clear victor.
    The President's Biofuels Interagency Working Group is just 
the place for such peer review, and I am thankful the President 
has engaged other organizations to help educate EPA on this 
issue because they simply don't get it.
    The consideration of land use effects in the lifecycle 
analysis should be limited to domestic direct impacts 
associated with growing grains until these indirect effects are 
better understood.
    I encourage the Subcommittee, all Members, to follow the 
lead of Senator John Thune, and others, Representative Moran, 
who mentioned this earlier today, to limit EPA to only use 
direct effects until we fully understand this.
    The third point in my closing seconds, I think it would be 
helpful for you to hear a perspective directly from an ethanol 
producer in today's marketplace. We are dealing with two major 
challenges; the confluence of unprecedented volatility in oil, 
corn, and ethanol prices and the evaporation of credit. 
Approximately 2 billion gallons of production capacity has been 
idled and more facilities, not next year, next month, are at 
risk of being shut down because of capital constraints.
    In order to restore sustainable industry-wide 
profitability, ethanol needs to be allowed to price into the 
fuel ration just as ingredients do in a feed ration. We need 
the Federal Government to provide a remedy to the law that 
arbitrarily restricts ethanol blending in a gallon of gasoline 
to ten percent. I strongly encourage you to support the current 
petition before EPA allowing up to 15 percent ethanol in 
gasoline.
    And if I may close with a few final comments, Mr. Chairman, 
ethanol's economic benefits are real. Today's ethanol industry 
supports almost 500,000 jobs in all sectors, provides a return 
on investment of 2.5 to 1 for every dollar invested, our energy 
security benefits are real, we are only second to Canada in 
terms of providing fuel to the United States of America. If we 
were a foreign producer--we are second. We have passed 
Venezuela, we have passed Saudi Arabia, we have passed Iraq.
    As a nation we have invested in a Strategic Petroleum 
Reserve. Have Members of this Subcommittee thought about a 
strategic ethanol reserve? Ethanol does not degrade like 
gasoline and having a fuel supply readily available for our 
military would be wise. Many people underestimate the ability 
of ethanol to power our equipment, including aviation. I call 
to your attention Greg Poe and the Fagen MX-2. This aircraft 
will perform at 19 air shows this year, including Andrews Air 
Force Base, at 275 miles an hour, twisting and tumbling through 
the air, in a spectacular display of the performance of 
American-made ethanol.
    We can do this. This is completely in our hands to control, 
and ethanol is the only alternative available right now making 
a substantial contribution. I hope this Administration and this 
Congress can stay fully committed to reducing our energy 
dependence, and I and others in private business are ready to 
help.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Bowdish follows:]

Prepared Statement of Nick Bowdish, General Manager, Platinum Ethanol, 
                            LLC, Arthur, IA
    Thank you Chairman Holden, Ranking Member Goodlatte, and Members of 
the Subcommittee. My name is Nick Bowdish and I am the General Manager 
of Platinum Ethanol in Arthur, IA. Platinum is a 110 Million Gallon per 
Year production facility that began operations in October of 2008. 
Prior to October 2008, I worked for Ron and Diane Fagen at Fagen, Inc., 
the largest design-builder of corn-based fuel ethanol plants in the 
United States.
    I am grateful to Chairman Peterson of the House Agriculture 
Committee for this opportunity to speak to you today.
    I appreciate the opportunity to provide the perspective of today's 
evolving ethanol industry on the critical issues concerning the 
Renewable Fuel Standard (RFS) adopted as part of the Energy 
Independence and Security Act of 2007 (EISA). Today, I will focus on 
three primary areas; the implications of the narrowly crafted renewable 
biomass definition in EISA, profound concerns about the selective 
enforcement of so-called ``indirect land use changes'' against 
biofuels, and I would like to close by providing Members of the 
Subcommittee a producer's perspective on the current state of the U.S. 
ethanol industry and some steps policymakers might consider taking to 
press forward with securing America's energy supply.
Renewable Biomass Definition
    First, I join the call with others today to encourage Congress and 
the U.S. Environmental Protection Agency (EPA) to revisit the narrow 
and restrictive definition of ``renewable biomass'' under EISA. 
Previous to my role at Platinum Ethanol, I was a business developer for 
Fagen, Inc. As my coworkers and I developed new sites for ethanol 
plants and advised clients on the feasibility of such projects, our 
primary job was to determine if the feedstock supply in the local area 
justified the plant site. Figure 1.1 below is an example of the 
detailed mapping that takes place when siting an ethanol plant. The 
shadow depicts the corn draw area in order for the given facility to 
secure sufficient feedstock.
Figure 1.1
[GRAPHIC] [TIFF OMITTED] 51922.004

    For long run success, an ethanol project requires access to a 
steady supply of feedstock, whether corn or biomass. As written in 
EISA, the definition of ``renewable biomass'' excludes significant 
tonnage of woody biomass and dead timber that could be harvested from 
our national forests and used to produce a low carbon, renewable, and 
cost effective biofuel.
    If we are to truly expand the production of ethanol from the U.S. 
Corn Belt to other regions of the country, we need common sense policy 
for the firms and entrepreneurs who have developed the technology to 
efficiently convert woody biomass into advanced biofuel. Like others, I 
believe a workable solution to this definition controversy can be 
found, one which guarantees that reasonable safeguards can be 
established to protect our nation's most precious and sensitive 
national forestlands, and at the same time allow for the sensible 
harvest of timber and biomass. Coincidentally, doing so can help thin a 
significant supply of dead timber that is simply dangerous fuel for 
wild fires. I support legislation introduced by Members of this 
Subcommittee, including H.R. 1190 introduced by Representative Herseth-
Sandlin and others to correct this definition.
    Based on my experience in siting and helping complete ethanol 
projects, the current definition of ``renewable biomass'' is 
contradictory to helping ensure we can grow the supply of domestic 
biofuels. It is stalling greater U.S. energy security and placing an 
unnecessary roadblock in front of the commercialization of advanced 
biofuel in many regions of the country.
Lifecycle Analysis of Greenhouse Gas Emissions--Indirect Land Use 
        Changes
    The new RFS schedule provides various carve-outs for renewable 
fuels based on their ability to reduce lifecycle greenhouse gas (GHG) 
emissions:
    Conventional Biofuel--is ethanol from corn starch, and conventional 
ethanol facilities that commence construction after the date of 
enactment of EISA 2007 must achieve a 20 percent reduction in lifecycle 
GHG emissions compared to gasoline.
    Advanced Biofuel--is renewable fuel (other than from corn starch) 
from biomass that reduces GHG emissions by 50 percent compared to 
gasoline. Cellulosic ethanol and biomass-based diesel qualify as 
advanced biofuel under the RFS.
    Cellulosic Biofuel--is renewable fuel derived from cellulose, 
hemicellulose, and lignin, and achieves a 60 percent reduction in GHG 
emissions compared to gasoline.
    I am deeply concerned that the definition of lifecycle GHG 
emissions in EISA is being construed by EPA in a manner that unfairly 
penalizes domestic grain-based ethanol, based on dubious linkages made 
to land clearing and agricultural practices in developing countries. 
There is a growing effort on the part of some interests to push this 
``indirect land use'' theory without having done any rigorous analysis 
or peer-review.
    On March 9 of this year, President Obama issued a Directive on 
``Scientific Integrity'' which said in part that ``Political officials 
should not suppress or alter scientific or technological findings and 
conclusions.'' According to a study completed by Global Insight on 
December 1, 2008, entitled ``Lifecycle Analysis of Greenhouse Gas 
Emissions Associated with Starch-Based Ethanol,'' basing policies such 
as the RFS or low carbon fuels standard in California on indirect land 
use change theory is ``getting politics ahead of the science.'' The 
report determines that computer-generated lifecycle predictions about 
indirect land use changes require considerably more analysis. According 
to the report, it is virtually impossible to accurately ascribe 
greenhouse gas impacts to biofuels based on indirect land use change. 
EPA's proposed enforcement of this appears to be ``getting politics 
ahead of science'' and in direct conflict with President Obama's 
Directive.
    I recognize and support that in order to conduct a thorough LCA of 
GHG emissions from biofuel crops, direct land use changes may be 
considered by EPA. However, it is inherently unfair and a disservice to 
public policy that EPA's rule examines both direct and indirect effects 
for ethanol, but does not also calculate or estimate both direct and 
indirect effects for petroleum. If EPA proceeds to make extreme 
assumptions about the carbon intensity of biofuels, relying on an 
untested ideology called ``indirect land use change,'' and remarkably 
assumes there are no such ``indirect effects'' from fossil fuels, this 
selective enforcement will place biofuels at an unfair competitive 
disadvantage in the fuels market.
    According to the Global Insight report I cited earlier in my 
testimony, it is neither fair nor accurate to attribute all current and 
future land clearing to biofuels. Changes in land use have always 
occurred and are not new, nor are biofuels the primary driver of them. 
Global population growth cannot be ignored as a factor. Remarkably, 
lifecycle analysis is being used to actually quantify GHG emissions, 
and the scientific literature shows a huge variation in estimates of 
carbon release from land clearing in general, on the order of 50 
percent plus or minus--a huge margin of error. Given this margin of 
error, it is unwise to rely on these models to make a major policy 
shift without further and more careful analysis.
    Global Insight also points out that new technology is making both 
corn and ethanol production more efficient and more environmentally 
friendly. According to the National Corn Growers Association, it takes 
nearly 40 percent less energy and land today to produce a bushel of 
corn than twenty years ago. I personally witnessed corn being planted 
``to the inch'' of where it is desired on my way to the Omaha airport. 
Precision agriculture and genetic markers are redefining the efficiency 
of corn. Furthermore, according to the U.S. Department of Energy, since 
2001, U.S. ethanol producers have achieved a 22% drop in total energy 
use. Between 2004 and 2007, ethanol plants reduced BTU usage by between 
14% and 21%.
    As someone who oversees the operation of a new, state-of-the-art 
ethanol production facility, I can attest that the amount of energy 
used by plants has been cut by dramatic percentages in recent years. 
EPA's analysis assumes that corn ethanol plants will utilize around 
30,000 BTUs of energy to manufacture 1 gallon of ethanol. Yet, in my 
facility and others like it around the U.S., our energy use has dropped 
to an average of less than 28,000 BTUs per gallon of ethanol as shown 
below in Figure 2.2, a 6 percent decrease.
Figure 2.2
[GRAPHIC] [TIFF OMITTED] 51922.005

    I believe it is critical for policymakers and EPA to recognize that 
oil is becoming less efficient and more harmful to the environment, and 
that these lifecycle models should compare future sources of oil to 
future sources of biofuel on an apple-to-apple basis. With the 
technology coming online in corn and ethanol production, the carbon 
footprint is only set to improve significantly in the next 10 years; 
whereas feedstock sources for the petroleum industry, such as oil 
sands, will further degrade petroleum's carbon footprint. According to 
the Global Insight report, high oil prices incentivize the production 
of crude oil from sources such as tar sands and coal which have 
considerably higher GHG emissions than biofuels. Depending upon the 
energy source used in the mining of tar sands, well-to-pump emissions 
can be over 300% of conventional crude oil. I think it is patently 
indefensible that EPA is comparing the LCA of biofuels to that of 
petroleum in 2005, since the carbon footprint of oil will degrade 
significantly post-2005 as new oil sources like tar sands are tapped. 
Indeed, if the indirect GHG emissions of biofuels are counted toward 
the carbon footprint, so should be the indirect emissions associated 
with petroleum production.
    Ascribing indirect effects associated with land clearing in foreign 
countries not only singles out the U.S. biofuels industry for uniquely 
unfair treatment, it establishes an unworkable precedent for regulation 
of other U.S. industries under future GHG control programs. The 
consideration of land use effects in LCA of GHGs should be limited to 
domestic direct impacts associated with growing grains for ethanol 
production. I encourage the Subcommittee to urge EPA to clarify that 
the calculation of lifecycle GHG emissions is limited to direct 
impacts.
State of the U.S. Ethanol Industry
    In closing, it is beneficial for you to hear, first hand, the major 
challenges and opportunities facing the U.S. ethanol industry today. 
The same forces making it difficult for other businesses to thrive are 
challenging ethanol producers today. Operating an ethanol plant, like 
any other production facility, requires access to capital and demand 
for your product. However, credit markets remain frozen and the 
economic recession has cooled demand for many products, so we're 
navigating the choppy sea. Specific to ethanol, the confluence of two 
unwelcome factors is seriously affecting us--unprecedented volatility 
in oil, corn, and ethanol prices and the evaporation of credit. 
Approximately 2 billion gallons of production capacity has been idled 
and many more facilities are at risk due to capital constraints.
    In order to restore sustainable industry-wide profitability, 
ethanol needs to be allowed to price into the fuel ration just as 
ingredients do in a feed ration. We need the Federal Government to 
provide a remedy to the regulation that arbitrarily restricts the 
blending of ethanol in gasoline to just ten percent. Right now, the law 
is biased against ethanol by limiting ethanol's use in a gallon of 
gasoline to just ten percent. Without question, the single most 
important thing Washington can do to help is to adjust this regulation 
so that motorists have fuel choice at the pump. Doing so will create 
green-collar jobs, help reduce the cost of fuel, reduce greenhouse gas 
emissions, and promote prosperity in rural America. Therefore, I 
strongly support the petition currently pending before EPA to allow up 
to 15 percent ethanol in gasoline, and encourage Members of the 
Subcommittee to support the waiver as well.
    Policies affecting ethanol provides you one of those rare 
opportunities to score victories on a wide array of public policy 
benefits, including supporting a domestic industry that creates jobs, 
improving energy security, and bettering the environment with 
calculations based on science rather than ideals.
    Ethanol's economic benefits are real. Today's ethanol industry 
supports more than 494,000 jobs in all sectors and provides a return on 
investment of 2.5 to 1 for every taxpayer dollar invested, according to 
a report released on February 23, 2009 by Dr. John Urbanchuk, Director 
of LECG, LLC.
    Ethanol's energy security benefits are real. According to the Clean 
Fuels Development Coalition, if ethanol was a foreign oil producer, 
only Canada would supply the U.S. with more gallons of fuel. In other 
words, the domestic ethanol industry supplies more fuel to the U.S. 
than Saudi Arabia, Venezuela, and Iraq. As a nation, we have invested 
in a strategic petroleum reserve. Have you considered the benefits of a 
strategic ethanol reserve? Ethanol does not degrade like gasoline and 
Members of this Committee would be wise to consider the national 
security benefits of having a fuel supply readily available for our 
military. Many people underestimate the ability of ethanol to power our 
equipment, including aviation. I call to your attention Greg Poe and 
the Fagen MX-2. This aircraft will perform at 19 Air shows this year, 
at 275 mph, twisting and tumbling through the air in a spectacular 
display of the performance ability of American made ethanol.
    A prosperous America lies in the hands of a committed group of 
individuals recognizing that we must not rely on foreign countries for 
our energy needs. Ethanol is the only alternative available right now 
making a substantial contribution to extending our American supply of 
energy. The determination of this Administration and this Congress can 
responsibly extend the control we have of our energy supply if you will 
fully commit to lessening our dependence on foreign oil. I and many 
others in private business are ready to help.
    In conclusion, I would like to once again thank Chairman Holden and 
Ranking Member Goodlatte for conducting this important and timely 
hearing. I look forward to your questions.

    The Chairman. Thank you, Mr. Bowdish.
    Mr. Feraci. Am I pronouncing that correctly?
    Mr. Feraci. Yes, Mr. Chairman.

         STATEMENT OF MANNING FERACI, VICE PRESIDENT OF
           FEDERAL AFFAIRS, NATIONAL BIODIESEL BOARD,
                        WASHINGTON, D.C.

    Mr. Feraci. Chairman Holden, Ranking Member Goodlatte, 
Members of the Subcommittee, I thank you for the opportunity to 
present testimony today. I am here today on behalf of the 
National Biodiesel Board, which is the national trade 
association for the U.S. biodiesel industry. Our membership 
produces a high-quality, renewable, low-carbon diesel 
replacement fuel that is 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 Program. The production and use of 
biodiesel is consistent with an energy policy that values the 
displacement of petroleum diesel fuel with low carbon renewable 
fuel, and there are significant energy security, environmental, 
and economic public policy benefits associated with biodiesel 
use.
    Yet, the industry finds itself in the midst of an economic 
crisis that threatens its future viability. The NBB is not 
seeking the creation of new Federal programs. A stable, 
reliable Federal policy framework based on existing policy will 
allow the industry to survive the current economic crisis. 
Implementation of a workable, realistic RFS2 is the key 
component of that framework.
    RFS2, for the first time, requires a renewable component in 
U.S. diesel fuel and provides a readily-attainable schedule for 
the use of biomass-based diesel that increases from 500 million 
gallons in 2009, to 1 billion gallons in 2012. To qualify for 
this program renewable fuel must reduce greenhouse gas 
emissions by 50 percent compared to the conventional diesel 
fuel it is replacing.
    The science pertaining to direct effects is well 
established. The USDA, DOE lifecycle study was initially 
published in 1998, and has been continually refined and updated 
since that time. According to this model, biodiesel reduces 
greenhouse gas emissions by 78 percent. By statute EPA must 
consider significant indirect emissions when calculating a 
renewable fuels emission profile.
    Unfortunately, it appears that the EPA's proposed rule that 
was unveiled yesterday relies on uncertain, inexact assumptions 
pertaining to indirect land use change in calculating 
biodiesel's greenhouse gas emissions profile. The result is 
that biodiesel produced from domestically-produced vegetables 
oils are disqualified from the biomass-based diesel program.
    There are many factors unrelated to U.S. biodiesel 
production that impact land use decisions abroad. For example, 
in Brazil, forestry, cattle ranching, subsistence farming drive 
land use decisions. Yet, the EPA's proposed methodology appears 
to attribute this change to U.S. biodiesel production. This 
assumption defies common sense.
    In fact, acreage in Brazil dedicated to the soybean 
cultivation actually decreased from 2004 through 2008, a time 
period during which U.S. biodiesel production increased from 25 
million gallons to 690 million gallons. If biodiesel production 
drove Brazilian land use decisions to the degree that the EPA's 
proposal asserts, the opposite would be the case.
    As a result of these dubious assumptions, EPA's proposed 
rule restricts feedstock to low carbon diesel replacement fuel 
to only animal fats and restaurant grease. Vegetable oils 
account for more than 60 percent of the feedstock that is 
available to meet 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 
volume goals for biomass-based diesel. This outcome is not 
consistent with either sound science or sound energy policy.
    Last, U.S. agriculture has historically realized increased 
productivity and 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 potential impact of land use change 
due to biofuels production will be further diminished, and this 
must be recognized in EPA's greenhouse gas emission 
calculations.
    Again, Chairman Holden, Ranking Member Goodlatte, I 
appreciate the opportunity to testify today and will be more 
than happy to answer any questions you may have.
    [The prepared statement of Mr. Feraci follows:]

    Prepared Statement of Manning Feraci, Vice President of Federal 
          Affairs, National Biodiesel Board, Washington, D.C.
Summary of Testimony:
    There are significant economic, energy security and environmental 
public policy benefits associated with the domestic production and use 
of biodiesel. Though the U.S. biodiesel industry has experienced growth 
since 2004, biodiesel producers find themselves in the midst of a 
severe economic crisis that threatens the nation's ability to 
domestically produce low carbon, renewable diesel replacement fuel. In 
2009, we anticipate production of biodiesel will be less than half of 
2008 levels and utilize approximately 15% of the nation's overall 
production capacity.
    The U.S. biodiesel industry is not seeking the creation of new 
programs, but is simply asking for expedient implementation of a 
stable, reliable policy framework that will allow the industry to 
weather the current economic storm and meet the readily attainable 
goals established for Biomass-based Diesel by the Renewable Fuel 
Standard (RFS2) program, as enacted in the Energy Independence and 
Security Act (EISA) of 2007 (P.L. 110-140). Accordingly, industry asks 
the Environmental Protection Agency (EPA) to ensure that the statutory 
2009 volume goals for Biomass-based Diesel are enforced.
    RFS2, by statute, requires EPA to consider significant indirect 
emissions when calculating the greenhouse gas emission (GHG) profile of 
biofuels. Sound science and common sense dictate that a fair, honest 
evaluation of international land use decisions account for substantial 
factors completely unrelated to biofuels production such as forestry, 
subsistence farming and cattle ranching. The GHG score of a biofuel 
should be based on sound science and not be penalized due to unrelated 
factors that are driving land use changes, many of which are difficult 
to account for in GHG emission modeling. In addition, the same 
standards and evaluation must be applied to petroleum diesel fuel--the 
fuel to which Biomass-based Diesel is being compared for purposes of 
determining its GHG emission profile.
    As the RFS2 rulemaking process moves forward, EPA should work 
constructively with stakeholders to implement a workable program that 
can meet the RFS2 volume goals for Advanced Biofuels. The EPA should 
not structure the program in a manner that restricts feedstock for low-
carbon diesel replacement fuel to only animal fats and restaurant 
grease by disqualifying vegetable oils as an eligible Advanced Biofuels 
feedstock. Vegetable oils account for more than sixty percent of the 
feedstock that is available to meet the RFS2 Biomass-based Diesel 
targets, and the RFS2 goal of displacing petroleum with low carbon 
renewable fuel simply cannot be met if vegetable oils are disqualified 
from the program. This outcome is not consistent with either sound 
science or sound energy policy.
    Last, U.S. agriculture has historically realized increased 
productivity and yields over time. As technology improves, it is 
reasonable to assume that these gains in efficiencies will continue. 
Further, there is a powerful economic incentive for agriculture 
producers around the globe to adopt more efficient practices. As these 
efficiencies are realized in the future, the potential impact of land 
use change due to biofuels production will be further diminished.
          * * * * *
    Chairman Holden, Ranking Member Goodlatte and Members of the 
Subcommittee, I thank you for the opportunity to testify today on 
behalf of the National Biodiesel Board (NBB) about the importance of 
the Renewable Fuel Standard to the U.S. biodiesel industry and the 
potential impact Indirect Land Use Change (ILUC) assumptions could have 
on implementation of this worthwhile program.
    About NBB: NBB is the national trade association representing the 
biodiesel industry as the coordinating body for research and 
development in the United States. It was founded in 1992 by state 
soybean commodity groups who were funding biodiesel research and 
development programs. Since that time, the NBB has developed into a 
comprehensive industry association which coordinates and interacts with 
a broad range of cooperators including industry, government and 
academia. NBB's membership is comprised of biodiesel producers; state, 
national and international feedstock and feedstock processor 
organizations; fuel marketers and distributors; and technology 
providers.
    Background and Industry Overview: Biodiesel is a diesel replacement 
fuel made from agricultural oils, fats and waste greases that meets a 
specific commercial fuel definition and specification. The fuel is 
produced by reacting feedstock with an alcohol to remove the glycerin 
and meet the D6751 fuel specifications set forth by the American 
Society for Testing and Materials (ASTM International). Biodiesel is 
one of the best-tested alternative fuels in the country and the only 
alternative fuel to meet all of the testing requirements of the 1990 
amendments to the Clean Air Act.
    Biodiesel is primarily marketed as a 5% blending component with 
conventional diesel fuel, but can be used in concentrations up to 20%. 
It is distributed utilizing the existing fuel distribution 
infrastructure with blending occurring both at fuel terminals and 
``below the rack'' by fuel jobbers. Biodiesel is beginning to be 
distributed through the petroleum terminal system. To date, biodiesel 
is available in over 40 fuel distribution terminals. In the past year, 
two major pipeline companies have successfully tested B5 blends in 
pipelines, and the biodiesel industry has committed funds to continue 
to study the technical needs required for moving biodiesel through U.S. 
pipelines. Already, biodiesel is moved through pipelines in Europe and 
extending that capability in the U.S. would significantly increase 
biodiesel penetration in the U.S. diesel fuel market.
    Biodiesel Public Policy Benefits: There are compelling public 
policy benefits associated with the enhanced production and use of 
biodiesel in the U.S.
    Biodiesel Reduces our Dependence on Foreign Oil: Biodiesel can play 
a major role in expanding domestic refining capacity and reducing our 
reliance on foreign oil. The 690 million gallons of biodiesel produced 
in the U.S. in 2008 displaced 38.1 million barrels of petroleum, and 
increased production and use of biodiesel will further displace foreign 
oil. In addition, biodiesel is an extremely efficient fuel that creates 
3.2 units of energy for every unit of fuel that is required to produce 
the fuel.
    Biodiesel is Good for the Environment: Biodiesel is an 
environmentally safe fuel, and is the most viable transportation fuel 
when measuring its carbon footprint, lifecycle and energy balance. The 
U.S. Department of Agriculture (USDA)/Department of Energy (DoE) 
lifecycle study shows a 78% reduction in direct lifecycle 
CO2 emissions for B100. One billion gallons of biodiesel 
will reduce current lifecycle greenhouse gas emissions by 16.12 billion 
pounds, the equivalent of removing 1.4 million passenger vehicles from 
U.S. roads. In 2008 alone, biodiesel's contribution to reducing 
greenhouse gas emissions was equal to removing 980,000 passenger 
vehicles from America's roadways.
    Biodiesel's emissions significantly outperform petroleum-based 
diesel. Research conducted in the U.S. shows biodiesel emissions have 
decreased levels of all target polycyclic aromatic hydrocarbons (PAH) 
and nitrited PAH compounds, as compared to petroleum diesel exhaust. 
These compounds have been identified as potential cancer causing 
compounds.
    Biodiesel is the only alternative fuel to voluntarily perform EPA 
Tier I and Tier II testing to quantify emission characteristics and 
health effects. That study found that B20 (20% biodiesel blended with 
80% conventional diesel fuel) provided significant reductions in total 
hydrocarbons; carbon monoxide; and total particulate matter. Research 
also documents the fact that the ozone forming potential of the 
hydrocarbon emissions of pure biodiesel is nearly 50% less than that of 
petroleum fuel. Pure biodiesel typically does not contain sulfur and 
therefore reduces sulfur dioxide exhaust from diesel engines to 
virtually zero.
    The Biodiesel Industry is Creating Green Jobs and Making a Positive 
Contribution to the Economy: In 2008 alone, the U.S. biodiesel industry 
supported 51,893 jobs in all sectors of the economy. This added $4.287 
billion to the nation's Gross Domestic Product (GDP) and generated 
$866.2 million in tax revenue for Federal, state and local governments.
    By conservative estimates, there is domestic feedstock available to 
support 1.77 billion gallons of annual biodiesel production in the U.S. 
The domestic industry has the capacity to support this level of 
production. The production of 1.77 billion gallons of fuel would 
support 78,619 jobs; add $6.660 billion to the GDP; displace 97.8 
million barrels of petroleum; generate $1.345 billion in revenue for 
Federal, state and local governments; and reduce greenhouse gas 
emissions by 27.4 billion pounds--the equivalent of removing 2.38 
million passenger vehicles from U.S. roads.
    The Biodiesel Industry Stimulates Development of New Low-Carbon 
Feedstocks: The feedstock used to produce U.S. biodiesel has 
increasingly diversified, with waste products such as animal fat and 
used restaurant grease (yellow grease) making up a larger portion of 
the feedstock used to produce fuel. Biodiesel production is currently 
the most efficient way to convert lipids into low-carbon diesel 
replacement fuel, and as a result, industry demand for less expensive, 
reliable sources of fats and oils is stimulating promising public, 
private and nonprofit sector research on new alternative feedstocks 
such as algae.
    Algae's potential as a source of low carbon fuel has been well 
documented, and a stable, growing biodiesel industry is necessary if 
the U.S. is to eventually benefit from the commercial scale production 
of algal-based biofuels. The NBB estimates that for every 100 million 
gallons of biodiesel that is produced from algae, 16,455 jobs will be 
created and $1.461 billion will be added to the GDP.
    U.S. Biodiesel Industry is Facing Severe Economic Hardship: Despite 
recent growth, the industry is in the midst of an economic crisis. 
Plants are having difficulty accessing operating capital. Volatility in 
commodity markets; reduced demand and inability to compete in the 
European marketplace are making it difficult for producers to sell 
fuel. Last, uncertainty relating to Federal policy that is vital to the 
industry's survival is sending inconsistent signals to the marketplace 
and undermining investor confidence.
    If prolonged, this downturn will lead to a severe retraction in 
U.S. biodiesel production capacity. Due to current market conditions, 
less than \1/3\ of the industry's facilities are currently producing 
fuel. NBB estimates that absent any change in Federal policy, U.S. 
biodiesel production will likely fall to 300 million gallons in 2009, 
which would cost the U.S. economy more than 29,000 jobs. This situation 
threatens the nation's ability to meet the advanced biofuels goals 
established in the 2007 Energy Bill.
    A Reliable Policy Framework is Needed for U.S. Biodiesel Industry: 
The U.S. biodiesel industry is not seeking the creation of new 
programs. Instead, common-sense improvements and thoughtful 
implementation of existing initiatives will help the industry survive 
in this difficult economic climate. Specifically, a multi-year 
extension of the biodiesel tax incentive and successful implementation 
of a workable RFS2 are needed if the nation is to reap the future 
economic, environmental, and energy security benefits associated with 
the production and use of biodiesel. For purposes of today's testimony, 
I will focus on RFS2.
    The Energy Independence and Security Act and the Renewable Fuel 
Standard: The Energy Independence and Security Act (P.L. 110-140), 
enacted on December 19 2007, significantly expanded and improved the 
RFS.
    By statute, RFS2 provides for the use of 36 billion gallons of 
renewable fuels in the U.S. by 2022. The program establishes a use 
schedule for Conventional Biofuels and Advanced Biofuels. The schedule 
for Conventional Biofuels, which must reduce GHG emissions by 20% 
compared to the baseline fuel it is displacing, increases from 10.5 
billion gallons in 2009 to 15 billion gallons in 2015. From 2015 
through 2022, the use requirement for Conventional Biofuels remains 
constant at 15 billion gallons. Biofuel production facilities placed in 
service prior to enactment of P.L. 110-140 are exempt from 20% GHG 
reduction requirement that is applicable to Conventional Biofuels.
    RFS2 also establishes a use schedule for Advanced Biofuels that 
begins at 600 million gallons in 2009 and increases to 21 billion 
gallons by 2022. Within the Advanced Biofuels schedule, there are 
specific use and GHG reduction requirements for Cellulosic Biofuels, 
Undifferentiated Advanced Biofuels, and Biomass-based Diesel. The 
statutory date of enactment for the RFS2 program is January 1, 2009.
    Implementation of a Workable RFS2 Biomass-based Diesel Schedule of 
Vital Importance to the U.S. Biodiesel Industry: For the first time, 
RFS2 specifically requires a renewable component in U.S. diesel fuel as 
part of the program's Advanced Biofuels schedule. Specifically, RFS2 
requires the use of 500 million gallons of Biomass-based Diesel in 
2009; 650 million gallons in 2010; 800 million gallons in 2011; and 1 
billion gallons in 2012. Between 2012 and 2022, a minimum of 1 billion 
gallons must be used, and the Administrator of the EPA has the 
authority to set the use requirement at a higher level.
    To qualify as Biomass-based diesel, fuel must reduce greenhouse gas 
(GHG) emissions by 50% compared to conventional diesel fuel. The EPA 
Administrator is provided the authority to reduce the GHG emission 
target to 40%. By statute, the Biomass-based Diesel requirement starts 
in 2009, and thus, is the first component of the Advanced Biofuels 
schedule to be implemented. Though fuels in addition to biodiesel will 
in all likelihood qualify for this schedule, the U.S. biodiesel 
industry is the only entity producing low carbon, renewable diesel 
replacement fuel at commercial scale that is readily accepted in the 
domestic marketplace.
    As is mentioned earlier in this testimony, the U.S. biodiesel 
industry is in the midst of an economic crisis. Plants are closing and 
production is well below comparable levels from last year. The EPA has 
the regulatory authority it needs to implement a workable program that 
is consistent with sound energy and environmental policy, and 
successful implementation of RFS2 will help create the market demand 
that will allow the industry to survive. A viable domestic biodiesel 
industry is in the nation's best interests, and expedient 
implementation of a workable Biomass-based Diesel program is a top 
industry priority. Accordingly, industry asks the EPA to take concrete 
steps to ensure that the 2009 volume goals established by statute for 
Biomass-based Diesel are enforced.
    The Inexact Nature of Indirect Land Use Change (ILUC) Assumptions: 
As mentioned previously, renewable diesel replacement fuel must reduce 
GHG emissions by 50% compared to conventional diesel fuel to qualify 
for the Biomass-based Diesel program. The science pertaining to direct 
emissions is well established. The USDA/DoE lifecycle study was 
initially published in 1998, and has been continually refined and 
updated since this time. According to this model, biodiesel reduces GHG 
emissions by 78%.
    By statute, RFS2 specifies that significant indirect emissions are 
to be considered when calculating a renewable fuel's GHG emission 
profile. EPA has opted to account for ILUC, in particular international 
land use assumptions, in its GHG calculations as part of the rulemaking 
process. There is neither consensus in the scientific community nor a 
widely accepted methodology that could be deemed credible to accurately 
calculate the impact of U.S. biofuel production on international land 
use decisions. Nevertheless, the EPA's decision to rely on a 
questionable GHG methodology inaccurately attributes significant 
deforestation in South America to the cultivation of oilseeds such as 
soybeans and canola produced in the U.S.
    The U.S. biodiesel industry currently produces the most sustainable 
fuel available in the marketplace. The NBB fully supports efforts and 
initiatives that are designed to protect sensitive ecosystems such as 
the rainforests in South America and Southeast Asia.
    With that said, sound science and common sense dictate that a fair, 
honest evaluation of international land use decisions account for 
substantial factors completely unrelated to biofuels production such as 
forestry, subsistence farming and cattle ranching. The GHG score of a 
biofuel should not be penalized due to unrelated factors that are 
driving land use changes, many of which are difficult to account for in 
GHG emission modeling. In addition, the same standards and evaluation 
must be applied to petroleum diesel fuel--the fuel to which Biomass-
based Diesel is being compared for purposes of determining its GHG 
emission profile.
    It is our understanding that the EPA's methodology places 
significant emphasis on land use changes in Brazil. Specifically, the 
EPA attributes deforestation in the Brazilian rainforest to U.S. 
biodiesel production, and this dubious assumption is used as the 
rationale to penalize the GHG emission score of U.S. biodiesel produced 
from vegetable oils. From 2004 through 2008, U.S. biodiesel production 
increased from 25 million gallons to 690 million gallons. If U.S. 
biodiesel production was causing significant land use change in Brazil, 
common sense would dictate land dedicated to Brazilian soybean 
production would have shown a corresponding increase.
    Yet in 2004, soybean production in Brazil covered 22.917 million 
hectares. In 2008, soybean production accounted for 21.400 million 
hectares--a decrease of 1.5 million hectares. As U.S. biodiesel 
production increased by 665 million gallons, land dedicated to soybean 
cultivation in Brazil decreased by 1.5 million hectares--a real world 
outcome that casts significant doubt on EPA's preliminary assumptions 
and again highlights that other significant factors outside of U.S. 
biofuels production drive land use decisions.
    Impossible to Meet Biomass-based Diesel Requirements Without 
Vegetable Oils as Qualifying Feedstocks: As the rulemaking proceeds and 
is ultimately finalized, a program structured in a manner that allows 
vegetable oils, including domestically-produced soybean and canola oil, 
to qualify as feedstock for the Biomass-based Diesel schedule is 
consistent with sound science and policy. Vegetable oils account for 
more than sixty percent of the feedstock that is available to meet the 
RFS2 Biomass-based Diesel targets, and the use requirements established 
by this component of the Advanced Biofuels schedule simply cannot be 
met if these feedstocks are disqualified from the program. We are hard 
pressed to believe this potential outcome is consistent with the will 
of Congress or sound environmental policy that values the displacement 
of petroleum diesel with low-carbon renewable fuels.
    Absent vegetable oils as a qualifying feedstock, biofuel producers 
will be forced to rely almost entirely on animal fats and yellow grease 
(used restaurant grease) to meet the RFS2 Biomass-based Diesel 
requirements. The U.S. biodiesel industry estimates that even with the 
most optimistic assumptions, the most biodiesel that could be produced 
in a year from this pool of limited feedstock would be 410 million 
gallons. Though animal fats and restaurant grease are important 
resources for biodiesel production--and U.S. producers can make quality 
fuel that meets the ASTM D6751 fuel specification from this feedstock--
there simply will not be enough of these feedstocks to produce the fuel 
needed to meet either the 500 million gallons of Biomass-based Diesel 
required in 2009 or the 1 billion gallons that is ultimately required 
in 2012. By contrast, there is ample feedstock to meet the Biomass-
based Diesel schedule if vegetable oils are permitted as a feedstock.
    It is also important to note other potential unintended policy 
impacts if the Biomass-based Diesel feedstock is limited to animal fats 
and restaurant grease. For example, this would add significant 
volatility and disruption in the markets as it pertains to the pricing 
of these commodities, and could compel entities not impacted by the 
RFS2 program that currently use these commodities in the production of 
other goods to seek lipids from less-sustainable sources. In addition, 
given winter and summer fuel blending regimes that are widely accepted 
and used in the marketplace, a program that limits U.S. biodiesel 
production to animal fats and restaurant grease would in essence make 
the U.S. industry seasonal in nature. Neither of these unintended 
outcomes is consistent with sound energy or environmental policy.
    GHG Calculations Must Account for Improved Agriculture Yields and 
Efficiency: U.S. agriculture has historically realized increased 
productivity and yields over time. As technology improves, it is 
reasonable to assume that these gains in efficiencies will continue. 
Further, there is a powerful economic incentive for agriculture 
producers around the globe to adopt more efficient practices. As these 
efficiencies are realized in the future, the potential impact of land 
use change due to biofuels production will be further diminished.
    New technology will add significantly to the U.S. raw material 
supply. Though the feedstock used to produce U.S. biodiesel has grown 
more diversified over time, soybean oil has been the most utilized 
biodiesel feedstock to date in the U.S. Based upon historical yield 
trends, domestic production of soybeans will continue to increase. 
However, a major research focus of companies such as Pioneer and 
Monsanto has been to create ``virtual acres'' through stepwise 
enhancements in yield technology and/or oil content. Monsanto plans to 
introduce new technology that can increase soybean yields 9 to 11 
percent. Pioneer, a DuPont Company, is commercializing soybean 
varieties that increase yields by as much as 12 percent. After years of 
research investments by the life science companies, these technologies 
have reached commercialization and are set to have a meaningful impact 
on soybean yields in 2010. More than 90 percent of U.S. farmers 
currently utilize herbicide-resistant soybean varieties, demonstrating 
farmers' willingness and desire to adopt technology that can enable 
improved profits through increased yields or decreased costs. If this 
same 90 percent of U.S. soybean acres adopted the new yield technology, 
more than 60 million acres could see a ten percent increase in yield. 
This equates to more than 250 million additional bushels of soybeans 
(the equivalent of 380 million gallons of biodiesel) without increasing 
acreage in the U.S.
    The same benefit can be achieved by increasing soybean oil content. 
Current industry genetic programs suggest ten percent oil increases are 
achievable within the next few years, and increasing soybean oil 
content by that percentage would generate approximately 120 million 
gallons of additional oil if adopted on 50 percent of soybean acreage. 
New approaches for achieving even higher oil levels in plants are being 
actively researched. The NBB has partnered with the Donald Danforth 
Plant Science Center to identify novel approaches to enhance oil 
production in soybeans and other oilseeds. This work centers on the 
hypothesis that the ability to utilize available carbon limits oil 
production. Therefore, the Danforth Center's work will focus on 
engineering carbon sinks that will pull metabolites through the oil 
production process in plants. This is a 3 year program that was 
initiated in 2008.
    The soybean industry will continue to play a key role in providing 
feedstock for the biodiesel industry for years to come. Based upon 
current technology available to soybean producers, if processing 
capacity expands it is reasonable to project the production of at least 
780 million gallons of biodiesel with existing soybean oil supplies in 
2012. This estimate does not take into consideration soybean oil 
exports, amounting to more than 300 million gallons of soybean oil in 
2008, which could be diverted into domestic biodiesel production. Nor 
does it take into account an estimated 1 billion bushels of soybeans 
that are exported and could be a source of biodiesel feedstock if the 
domestic crushing industry further expanded capacity.
    In Conclusion: The provision in RFS2 establishing the Biomass-based 
Diesel Schedule is consistent with energy and environmental policy that 
values the displacement of petroleum diesel with low carbon renewable 
fuels. Expedient implementation of a workable RFS2 program is a top 
priority for the U.S. biodiesel industry that will allow the nation to 
continue reaping the economic, energy and environmental benefits 
associated with the increased production and use of biodiesel.
    Chairman Holden, Ranking Member Goodlatte, and Members of the 
Subcommittee, I again thank you for having the opportunity to testify 
before you today, and I would be pleased to answer any questions you 
may have.

    The Chairman. Thank you.
    Mr. Pechart.

STATEMENT OF MICHAEL L. PECHART, DEPUTY SECRETARY FOR MARKETING 
                  AND ECONOMIC DEVELOPMENT AND
          POLICY DIRECTOR, PENNSYLVANIA DEPARTMENT OF
                  AGRICULTURE, HARRISBURG, PA

    Mr. Pechart. Chairman Holden, Ranking Member Goodlatte, and 
Members of the Committee, good afternoon.
    As the Chairman so eloquently recognized, Pennsylvania has 
much to offer the biofuels effort, the environment and the 
renewable energy economy developing in the nation from 
feedstock such as wood and food waste. A recently-published 
report by the Hardwoods Development Council estimates 
sufficient woody biomass exists to allow for 6 million dry tons 
of woody biomass harvested annually, on a sustainable basis, 
with the potential of producing 6 million megawatt hours of 
electricity among 45 small power plants or 540 million gallons 
of cellulosic ethanol or 300 million, 40 pound bags of wood 
pellets.
    Although there is a debate of how much volume that could 
practically produce, we know that current paper and 
manufactured board business in Pennsylvania uses about 1 
million tons annually, and in the early 1990s, it used 3 
million tons. So there is a strong emphasis and significant 
amount of renewable energy that could be produced from this.
    The report concluded that small distributed projects such 
as Fuels for Schools, district heating or combined heating and 
power will have the most chance for sustainable feedstock 
supply, and therefore, success in Pennsylvania. Wood energy has 
the potential to be a significant part of achieving the goals 
of Pennsylvania's renewable portfolio standards, while also 
facilitating the production of advanced biofuels.
    Proposed renewable biomass definition provisions in the 
proposed regulations for the Renewable Fuel Standard would not 
allow Pennsylvania to reach its full feedstock supply 
potential. Limiting the use of forest biomass will disadvantage 
some states like Pennsylvania and disincentivize achieving 
energy mandates, increasing costs to consumers, and creating 
new disparities in economic development.
    To encourage the maximum development of all renewable 
sources of energy, the Renewable Fuel Standard should be as 
inclusive as possible as to feedstocks and methods rather than 
to arbitrarily discourage any source on its face. Wood and 
woody biomass is a necessary, logical, and sustainable 
component of a renewable energy portfolio plan. States should 
be in the best position to sustainably manage these decisions 
on a case-by-case basis as they work to achieve the portfolio 
standards that are most relevant to their resources and their 
needs. To that end Pennsylvania has already published formal 
guidance on harvesting woody biomass for energy in our state.
    Another definitional category I would like to comment on is 
food waste. Food waste needs to be clearly defined and 
sufficiently broad to allow for an array of feedstocks such as 
nutshells, cocoa hulls, husks, seeds, and fruit pits. 
Agriculture is the number one industry in Pennsylvania, 
resulting in mass production of foods, including snacks, canned 
goods, and dairy products. The Act must provide an expanded 
definition of food waste to include processing waste and 
cannery waste as renewable sources of biomass energy.
    Pennsylvania, I would note, currently has two anaerobic 
digesters operating that are processing cheese waste to produce 
methane. Yellow, brown, and trapped grease should be provided 
flexibility to allow local collection and use as a renewable 
energy feedstock through expanded general permits within 
states. Renewable energy goals should support the use of yellow 
grease animal fat for biodiesel or methane production, or to 
use these materials directly as boiler fuel. Provisions should 
also be included for unsuitable, outdated, and altered lots of 
feed, grain, or animal products to include biomass energy 
production alternatives.
    The logic that appears to be applied in the indirect 
lifecycle greenhouse gas accounting for land conversion such as 
recultivating fallow land is to assume that a vast carbon sink 
has now been lost and would remove any eligibility for biofuels 
production. Fallow land should not be subject to indirect land 
use lifecycle greenhouse gas calculations because it 
inappropriately imposes a penalty. Such acreage has provided 
for unintentional, temporary, and limited carbon storage. It is 
inappropriate that fallow land conversion automatically assume 
a massive soil carbon increase. Soil carbon release is most 
dependent upon tillage practices, and I would note in 
Pennsylvania in the last 2 years we have moved 50 percent of 
our agricultural production based on no-till, which is a 
tremendous accomplishment.
    As structured, I don't believe the definitions allow for 
biofuels production that may be facilitated through the growth 
of warm season grasses on coal mine reclamation sites essential 
to both Pennsylvania and the Chesapeake Bay Region. I would 
note just in Pennsylvania alone we have 180,000 acres of land, 
abandoned mine land that could be growing energy crops right 
now.
    This definition would need to define crops such that it is 
clearly broad enough to include grasses, even cool season 
grasses such as miscanthus, and it can't be limited to ag lands 
but also needs to preserve forestlands.
    In closing, it should be recognized that there is not a 
single solution or prescription for renewable energy that fits 
all states equally. Some are blessed with great solar or wind 
energy potential, and others like Pennsylvania have an 
abundance of wood and waste and agricultural waste energy 
potential.
    Moreover, there is no single type of feedstock or biofuel 
that is the silver bullet for our renewable energy economy. To 
the contrary, it is only with a mix of crops, with the right 
crop grown on the right acre, with the best management 
practices in place, and other sustainably available renewable 
feedstocks that we can achieve energy, security, economic, and 
water quality goals.
    Thank you, Congressman Holden and Members of the Committee.
    [The prepared statement of Mr. Pechart follows:]

     Prepared Statement of Michael L. Pechart, Deputy Secretary for
 Marketing and Economic Development and Policy Director, Pennsylvania 
               Department of Agriculture, Harrisburg, PA
    Pennsylvania and the Chesapeake Bay Region are rich in natural 
resources, agricultural land and products, and renewable energy 
feedstocks. Because of these facts, in addition to the outstanding 
leadership and expertise of individuals, organizations, universities, 
and government agencies the region is poised to lead the nation in 
renewable energy production. The same geographic diversity that allows 
us to produce and process such a wide range of crops and commodities 
also dictates that our renewable energy potential come from a suite of 
diversified alternatives. Pennsylvania leads the nation in the growing 
volume of hardwood species, with 17 million acres in forestland. We 
have been the leading producer of hardwood lumber in the United States, 
with production of over 1.1 billion board feet in 2006, and 
Pennsylvania leads in the export of hardwood lumber. Recent U.S. Forest 
Service data shows that our forest growth to harvest rate is better 
than two to one. Our vast renewable resource puts the hardwoods 
industry at the forefront of manufacturing in the Commonwealth. In 
2006, the industry output was $17 Billion, employing nearly 86,000 
people.
    Endless possibilities to create advanced biofuels are provided by 
the definitions of H.R. 6 of the 110th Congress, the ``Energy 
Independence Act of 2007.'' However, Pennsylvania has much to offer the 
biofuels effort, the environment and the economy regarding feedstocks 
from wood and food waste, and indirect lifecycle greenhouse gas 
accounting that also should be taken into consideration in the current 
language.
    Pennsylvania recognizes the importance of this resource and 
industry to the Pennsylvania economy. The General Assembly of 
Pennsylvania created the Hardwoods Development Council within the PA 
Department of Agriculture to promote development and expansion of the 
industry. A recently published report of a Council sponsored Task Force 
on ``The Low Use Wood Resource'' estimates sufficient woody biomass 
exists to allow for 6 million dry tons of to be harvested annually on a 
sustainable basis with the potential of producing 6 million megawatt 
hours of electricity among 45 small power plants; or 540 million 
gallons of cellulosic ethanol; or 300 million 40 pound bags of wood 
pellets. Although there is debate on how much of that volume could 
practicably be available for harvest, we know that current paper and 
manufactured board production in PA uses about 1 million tons, and in 
the early 1990s used 3 million tons; so there is strong evidence to 
show that a significant amount of renewable energy can be produced. The 
majority of Pennsylvania's forestland is owned privately by 
approximately 700,000 different people. The report concluded that 
small, distributed projects such as, ``Fuels for Schools'', district 
heating or combined heating and power will have the most chance for 
sustainable feedstock supply and therefore success in Pennsylvania. 
Wood energy has the potential to be a significant part of achieving the 
goals of Pennsylvania's Renewable Portfolio Standards while also 
facilitating the production of advanced biofuels.
    Proposed renewable biomass definition provisions in the national 
Renewable Fuel Standard, taken from H.R. 6 of 2007 would not allow 
Pennsylvania to reach its full feedstock supply potential. Limiting use 
of forest biomass will disadvantage some states like Pennsylvania and 
disincentivize achieving energy mandates, increasing costs to consumers 
and creating new disparities in economic development.
    To encourage the maximum development of all energy sources, 
legislation should be as inclusive as possible as to feedstocks and 
methods, rather than to arbitrarily discourage any source on its face. 
Wood and woody biomass is a necessary, logical and sustainable 
component of a renewable energy portfolio plan. States should be in the 
best position to sustainably manage these decisions on a case-by-case 
basis as they work to achieve the portfolio standards that are most 
relevant to their resources and needs. To that end for example, 
Pennsylvania has already published formal Guidance On Harvesting Woody 
Biomass for Energy in Pennsylvania which can be downloaded at http://
www.dcnr.state.pa.us/PA_Biomass_guidance_final.pdf.
    Federal policy should promote sustainable forest management which 
includes the proper and appropriate use of low value biomass material. 
Management of this resource improves forest health, can improve habitat 
quality, contributes to pest control, and reduces fire risk; as well as 
creating economic activity. Definitions of eligible biomass feedstocks 
should put working forests and forest industries on an equal basis with 
other renewable energy sources. Federal lands must be included into the 
renewable energy equation. It is illogical and counter-productive to 
create another disincentive to proper silvicultural management on 
Federal lands that are already in desperate need of treatments. Removal 
of biomass material can help improve forest health, control insects and 
disease, and prevent catastrophic wildfire; as well as significantly 
contributing to renewable energy goals and having positive impacts on 
rural economies. This is particularly evident on the Allegheny National 
Forest.
    ``Food waste'' needs to be very clearly defined and sufficiently 
broad to allow for an array of feedstocks such as nut shells, cocoa 
hulls, husks, seeds/pits, etc. Agriculture is the number one industry 
in Pennsylvania resulting in mass production of foods from snacks, 
canned goods, and dairy products. The Act must provide an expanded 
definition of food waste to include processing waste and cannery waste 
as renewable sources for biomass energy. Pennsylvania currently has two 
anaerobic digesters operating by processing cheese whey to methane. 
Yellow, brown and trap grease should be provided flexibility to allow 
for local collection and use as a renewable energy feedstock through 
expanded general permits within states. Renewable energy goals should 
support the use of yellow grease and animal fats for biodiesel or 
methane production or to use these materials directly as boiler fuel. 
Provisions should also be included for unsuitable, out dated, and 
altered lots of feed, grain, or animal products to include as biomass 
energy production alternatives.
    As structured, I don't believe the definitions allow for biofuels 
production that may be facilitated through the growth of warm-season 
grasses on coal mine reclamation sites--essential to both Pennsylvania 
and Chesapeake Bay Region. The definition would need to define 
``crops'' such that it is clearly broad enough to include grasses (even 
cool-season grasses such as Miscanthus) and it can't be limited to 
agricultural lands but also needs to preserve forested land.
    The broader implication for the nation is the interface of this 
first part of the definition and attempts to incorporate indirect 
lifecycle greenhouse gas standards related to biofuel development. This 
approach is well-intended but the limited research to date seems to 
assign a permanent and continual loss of soil carbon when a farmer 
turns over a fallow field. The current definition allows for biofuel 
feedstock to be produced from recultivating of fallow fields (fallow 
prior to 2007). This is appropriate. Those lands have most likely been 
fallow primarily due to the poor economics for agricultural commodities 
in all but the most recent years.
    The logic that appears to be applied in the indirect lifecycle 
green house gas accounting for land conversion, such as recultivating 
fallow land, is to assume that a vast carbon sink has now been lost and 
would remove any eligibility for biofuels production. Fallow land 
should not be subject to indirect land use lifecycle greenhouse gas 
calculations because it inappropriately imposes a penalty. Such acreage 
has provided for unintentional, temporary and limited carbon storage. 
It is inappropriate that fallow land conversion automatically assumes a 
massive soil carbon release. Soil carbon release is mostly dependent 
upon which tillage practice is utilized. Drill-seeding and no-till 
planting significantly reduces soil carbon release than conventional 
tillage of fallow lands. In Pennsylvania, we have seen a dramatic shift 
away from conventional tillage practices in the last 2 to 3 years. 
These practices should be encouraged in these definitions and they 
should be accounted for accordingly for there increased environmental 
benefits instead of applying a blanket calculation for any fallow land 
conversion. We are sitting on at least 200 million acres of once 
farmed, now abandoned land in the U.S., much of it in the Northeast. A 
great research opportunity and motivation for sustainable agriculture 
exists if this land could be brought back into production in ways that 
also increase carbon sequestration through use of perennials. 
Documenting that positive Land Use Changes impact provides additional 
income from other farmers, or ultimately consumers, would provide 
incentives for farmers to implement sustainable practices.
    While the indirect land use analysis under the RFS is specific to 
carbon, and is global in scale, we can refer to a local study 
demonstrating indirect land use effects on water quality. The Biofuels 
for the Bay Report, published by the Chesapeake Bay Commission in 2007, 
identified the potential water quality impacts to the Chesapeake Bay 
when high commodity prices increase corn acreage. The report found that 
when grown with typical levels of best management practices, the 
nitrogen loads from increased corn acreage could increase Bay nitrogen 
levels by up to 5 million pounds--a level that would eclipse annual 
progress in nitrogen reductions. One of the recommendations that 
resulted from this report was a focus on development and production of 
a next-generation biofuels industry--one that uses biomass such as 
switchgrass, forest thinnings, or fast-growing trees as feedstocks. 
These feedstocks do not require significant nutrient inputs and can act 
as riparian buffers for other agricultural land. These same feedstocks 
would most likely score well under an indirect land use analysis for 
carbon, because they have the capacity to sequester carbon and, since 
they are able to be grown on relatively marginal land, they do not 
directly compete with food and feed crops.
    This is not to say that corn is a bad crop. Corn is an important 
source of food and feed to this country and the world. When grown using 
a full suite of best management practices, its environmental impact is 
minimal. However, our dairy, cattle, and hog growers and food 
processors were significantly impacted when grain prices spiked in 
reaction to, among other things, increasing corn ethanol production. We 
acknowledge that speculation, as opposed to true supply and demand, was 
a contributor to the price volatility, but the effect was the same.
    Additionally, first-generation ethanol, such as that produced from 
corn, is an important first step in the evolution to cellulosic and 
other advanced biofuels. As we anxiously await commercial-scale 
technology for advanced biofuel production, first-generation ethanol 
will help to grow the distribution and other infrastructure needed for 
a mature biofuels industry. In the meantime, Pennsylvania and other 
states in the Chesapeake Bay region are encouraging the production of 
first-generation ethanol from winter cover crops such as barley. 
Because they are grown on the same acreage, cover crops do not compete 
with corn or soybeans. Cover crops also reduce excess nitrogen in the 
soil and reduce runoff, improving water quality.
    It should be recognized that there is not a single solution or 
prescription for renewable energy that fits all the states. Some are 
blessed with great solar or wind energy potentials, and others like 
Pennsylvania have an abundance of wood energy potential. Moreover, 
there is no single type of feedstock or biofuel that is the silver 
bullet for renewable energy. To the contrary, it is only with a mix of 
crops, with the right crop grown on the right acre, with the right best 
management practices, and other sustainably available renewable 
feedstocks that we can achieve both our energy security, economic, and 
water quality goals.

    The Chairman. Thank you.
    Ms. Webster.

         STATEMENT OF ANITRA B. WEBSTER, OWNER, FAMILY
          FOREST, LYNCHBURG, VA; ON BEHALF OF AMERICAN
                       FOREST FOUNDATION

    Ms. Webster. Thank you for the opportunity to appear before 
you today to talk about the Renewable Fuel Standard and how it 
could impact family forest owners. I am here today representing 
the American Forest Foundation, home of the American Tree Farm 
System', a network of over 91,000 family forest 
owners across the country who are committed to conservation.
    Many of you are probably familiar with tree farmers in your 
own state, family forest owners who typically own small tracks 
of forest and manage it for wildlife, hunting, fishing, 
recreation, and timber production. My family forest is located 
near Lynchburg, Virginia, in Big Island, where I actively 
manage about 390 acres. I entered the tree farm system decades 
ago and have managed my land sustainably according to 
international standards since then.
    Now, you probably are asking yourself why do family forest 
owners care about the Renewable Fuel Standard. Well, it is 
pretty simple. Forest biomass can and should be an important 
source for renewable fuels, and right now we really need new 
markets with the falling off of the housing industry.
    Additionally, beyond my interest as a family landowner, 
allowing the use of forest biomass to meet our energy needs 
also helps reduce greenhouse gases and improves the health of 
our forests. If we wish to generate a large portion of our 
energy needs from renewables, forest biomass is a cost-
effective, readily available, sustainable, and renewable source 
of material that can help us meet these needs.
    Unfortunately, the Renewable Fuel Standard passed in 
Congress in 2007, essentially left out the opportunity for 
forest family owners and privately-held forests to supply 
biomass for the production of renewable fuels.
    I know Congress I working on a renewable electricity 
standard and considering the same restrictions on the use of 
biomass from my lands for that electricity generation. I am 
here today to urge you to fix the standard and allow all 
sustainably produced forest biomass from both planted forests 
and those that naturally regenerate.
    I would like to point out a few problems with the current 
approach to restrict forest biomass as it might be applied to 
my land. The first problem is a limitation to only actively-
managed tree plantations. I happen to have about 20 to 30 acres 
stand of white pine that I planted in the late 1980s in 
abandoned fields, and Photo 1 on your attachment will show 
that. This stand is now growing to maturity and is ready for 
thinning. Thinning like this will help enhance the wildlife 
habitat and allow the trees left behind to grow to a full 
height and maturity.
    But under the current definition of renewable biomass it is 
not clear whether my planted pine stands are considered 
actively-managed tree plantations. If I were to talk about it 
myself, I don't think I would call it that since I only do 
minor work on the plantation, and I don't use any pesticides or 
herbicides or fertilizers for that matter.
    Right now there is no market for the thinned trees mostly 
because of the timber market declines that are happening. So it 
is not economical to do the thinning of the forest that the 
forest needs right now. A renewable energy market could help me 
recover the cost of doing these sorts of activities, and that 
would, of course, improve the environment at a much lower cost.
    The second problem is a limitation on the use of biomass 
from naturally-regenerating forests. Roughly 340 acres of my 
land is not planted forests but rather forestland that 
generates naturally, as you can see in Photo 2 on that 
attachment. A number of years ago I harvested a fair bit of 
older trees, selling them for the lumber, but, obviously, left 
trees behind for seed production and shade so that the new 
growth could develop. This, obviously, is the way we regenerate 
a forest, and it had, indeed, ensured a strong, natural 
comeback.
    While most of the trees removed in the forest will sell for 
lumber, not every tree is straight enough, so we either sell it 
for pulp or if there is no market, we have to leave it in the 
forest, which becomes a part of that potential forest fire. I 
would not be able to sell any of these trees for renewable 
energy because they don't qualify under the standard. The only 
thing I could sell are the tops, the limbs, and the brush lying 
around. If these restrictions are in place in an attempt to 
protect the environment, if you ask me as a landowner, who has 
worked on the land for the last 20 some years, this will not 
have the effect.
    Instead, it has the effect of making it much more difficult 
to use the forest biomass as fuel stock and for renewable 
fuels, which could actually mean less environmental protection. 
The families do not have the income to stay on the land. They 
may be forced to sell their land to a developer or convert it 
to some other use, which obviously doesn't provide the 
environmental benefit.
    Mr. Chairman, I would also like to ask you to think about 
this. We invented the wheel a few thousand years ago. We have 
invented computers, but even with all those technological 
advances and so forth we still need viable, healthy, 
productive, and sustainable forests, and we also need a cash 
flow income.
    Thank you very much, Mr. Chairman and Members of the 
Committee. I urge you to fix this problem and allow the 
nation's family forest owners to help meet our nation's energy 
needs.
    I will be happy to answer any questions.
    [The prepared statement of Ms. Webster follows:]

    Prepared Statement of Anitra B. Webster, Owner, Family Forest, 
         Lynchburg, VA; on Behalf of American Forest Foundation
    Mr. Chairman, Ranking Member Goodlatte, and Members of the 
Subcommittee, thank you for this opportunity to appear before you today 
to talk about the Renewable Fuel Standard and how it could impact 
family forest owners in my home State of Virginia and across the 
country.
    I'm here today representing the American Forest Foundation, home of 
the American Tree Farm System', a network of over 91,000 
family forest owners across the country who are committed to 
conservation. Many of you are probably familiar with ``Tree Farmers'' 
in your state-family forest owners who typically own small tracts of 
forest, and manage it for wildlife, hunting, fishing, recreation, and 
timber production.
    My family forest is located near Lynchburg, Virginia, in Big 
Island, where I own and actively manage 390 acres. It started out as an 
old abandoned farm, but I've worked since 1985 to restore the land to a 
healthy forested state correcting bad forestry practices. As a 
participant in the American Tree Farm System', I manage my 
forest sustainably, under a management plan and certified by a third-
party audit to be in compliance with nine standards of sustainability. 
I entered the Tree Farm System decades ago and in fact, was named the 
outstanding Tree Farmer of the year in Virginia in 1991.
    Now you're probably asking yourself: Why do family forest owners 
care about the Renewable Fuel Standard? Well it's pretty simple. Forest 
biomass can and should be an important source for renewable fuels. And 
right now we really need new markets, with the fall off in housing.
    Unfortunately, the Renewable Fuel Standard passed by Congress in 
2007 essentially left out the opportunity for family forests and other 
privately held forests to supply biomass for the production of 
renewable fuels. This is a serious concern for family forest owners, 
who are working hard every day to pay their taxes and maintain healthy 
forests.

    I am here today to urge you to fix the Standard to allow all 
sustainably produced forest biomass, from both planted forests and 
those that naturally regenerate.

    Without this change, even properties like mine, that are certified 
to meet international standards for sustainable forest management, 
could be unfairly excluded from an important emerging market, at a time 
when the forest products industry is at a 30 year low.
    With the change, Congress can keep healthy forests as forests, 
preserving their capacity to store carbon and provide clean water, 
wildlife, recreation and scenic values to their communities.
    Expanding the Standard in this manner is critically important in 
helping America to:

    (1) Strengthen a form of renewable energy that reduces greenhouse 
        gases.

    (2) Meet our nation's renewable energy goals.

    (3) Encourage sustainable forest management on millions of private 
        forests.

    (4) Create new markets for private forests.

    The only forest biomass considered ``renewable'' and allowed under 
the current Standard is that from ``actively managed tree plantations'' 
that already exist or tops and limbs of trees, known as slash, and 
brush. By excluding biomass from naturally regenerated forests and 
planted forests that are not ``actively managed'', even if these 
forests are sustainably managed, family forest owners are precluded 
from effective participation.
Impact on Family Forest Owners
    Let me give you an example on how the restrictive Standard impacts 
a family forest owner like me. I happen to have a 20-30 acre stand of 
white pine that I planted back in the late 1980's in abandoned fields 
(see Photo #1 attached). This stand is now growing to maturity and is 
just about ripe for thinning. Normally I'd have a logger come in and 
remove some of the smaller trees to make way for the other trees to 
grow larger. Thinning like this will also help enhance wildlife 
habitat. I have a lot of turkey, deer, and other wildlife.
    Here's the problem: under the current definition of renewable 
biomass, it's not clear whether my planted pine stands are considered 
``actively managed tree plantations.'' If I were to talk about it 
myself, I don't think I would call it that, since I only do minor work 
to maintain it, and I don't use any pesticides or fertilizers.
    What's also unfortunate right now, if I want to do this thinning 
for both economic and ecological reasons, there's no market for the 
trees. So it's not economical to do the thinning the forest needs. A 
renewable energy market could help me recover cover the cost of doing 
these sorts of activities, so we can help improve the environment at a 
lower cost.
    There's a related problem--in terms of qualifying as forest 
biomass--with the other forest on the rest of my land. The rest of my 
forest, roughly 340 acres, is not a planted forest, but rather 
forestland that naturally regenerates and essentially grows on its own 
(see Photo #2). A number of years ago, I decided to do a ``shelterwood 
cut'' where I worked to remove a lot of the older trees, selling most 
for lumber, but leaving trees behind for seed production and shade, so 
new growth can develop. This is a way to regenerate forests and ensure 
that my natural forest comes back strong.
    While most of these trees will sell for lumber, not every tree is 
straight enough, so we either try to sell it for pulp or if there is no 
pulp market, we leave it in the forest. I would not be able to see any 
of these trees used for renewable energy because they don't qualify 
under the Standard. The only thing I could sell is the tops and the 
limbs and any brush lying around.
    Interestingly, there is a Dominion Power facility about 45 miles 
from my land and that plant does use wood chips to generate 
electricity. I know Congress is working on a Renewable Electricity 
Standard and is considering the same sorts of restrictions on the use 
of wood for electricity. Under this scenario, the facility could not 
get credit for the biomass from my forests. And I am left out of the 
market.
    This perverse result would occur with my similarly situated 
neighbors and colleague family forest owners across the country.
    Most of the forests in Virginia are naturally-regenerating forests, 
meaning they aren't typically planted but come back on their own. Under 
the Standard, the only materials that can be utilized for fuels from 
this type of forest are tops and limbs of trees.
Improve the Practicality of the Standard
    The current Standard only allows trees from ``actively managed tree 
plantations'' that already exist to be counted. No one really knows 
what that term means, and frankly, because of the incredible variation 
across the country in how forests grow and are managed, I think it 
would be incredibly difficult to figure out what that means and enforce 
it.
    So if I plant trees in a stand that isn't actively managed, which 
is not well defined and could be very hard to interpret, I will only be 
able to sell a very small part of those planted trees for renewable 
fuel.
    Not only is this ambiguous and confusing--requiring a landowner to 
guess what's in and what's out--it will be tremendously difficult to 
determine whether a particular tree came from an active tree plantation 
or perhaps was just planted in my backyard at some point. On my 
property I have white pine stands that are planted and white pine 
stands that naturally regenerated. Once trees from these stands are 
harvested, they all look the same. They would all go to a log-yard, 
where they are aggregated for sale to the highest-value market. 
Tracking the planted tree and the natural tree, would be an impossible 
and costly feat.
    These kinds of restrictions are just not practical when considering 
the nature of the forest products supply chain and how harvesting 
occurs.
    We understand that the intention behind the language was to protect 
the environment and ensure that a renewable fuels market does not 
unintentionally trigger unsustainable harvesting. But this is the 
exactly wrong way to do it. Instead, it has the effect of making it 
much more difficult to even use forest biomass as a feedstock for 
renewable fuels.
    Cutting family forest owners out of markets can actually mean less 
environmental protection. If families do not have income to stay on the 
land, they may be forced to sell their land to a developer or convert 
it into some other use, that doesn't provide the same level of 
environmental benefit.
Strengthen a Form of Renewable Energy that Reduces Greenhouse Gases
    Forest biomass is plentiful in the U.S., but its potential as a 
renewable energy source at a national level remains largely untapped. 
In fact, we have fifty percent more forest biomass today than we did in 
1950.
    This is a critical time for our nation as we begin the difficult 
transition to more of a carbon-neutral economy. Healthy forests will 
play a central role in any national climate change strategy because 
they capture and store carbon emissions from all sources. U.S. forests 
now sequester 10% of the total U.S. carbon emissions every year, and 
could do even more if policies are adopted that support forest 
management designed to maximize greenhouse gas reducing benefits.
    By redefining the Standard in a more practicable way that includes 
family forest owners, families will have an added incentive, and stream 
of revenue, that can help them stay on the land and continue managing 
their forest as a healthy forest.
Meet Our Nation's Renewable Energy Goals
    Renewable energy standards now under consideration by Congress set 
forth a goal of meeting 25% or the nation's electricity demands from 
renewable sources of energy. But under the overly restrictive 
definition under consideration in these standards, only roughly 15% of 
the nation's available forest biomass resources could be used for 
electricity. The same is true for the Renewable Fuel Standard.
    Unless forest biomass from all sustainably managed forests is 
included in the Renewable Fuel Standard, we will miss a time-sensitive 
window for engaging family forest owners in the nation's transition to 
renewable sources of energy.
Encourage Sustainable Forest Management on Millions of Private Forests
    As more and more private forests are converted to non-forests 
uses--at the rate of 1.5 million acres every year--Congress needs to 
support policies that encourage sustainable forest management. Since 
privately owned forests make up nearly \2/3\ of all forestland in the 
U.S., what each individual forest owner decides to do with his or her 
land can have a tremendous impact on the environment, wildlife, and 
forest-based communities.
    What do we mean by allowing all sustainable forest biomass to be 
included in the Renewable Fuel Standard? Sustainable forest management 
essentially means that the forest is managed in a way that protects 
both the environmental and economic potential from that forest. There 
are a variety of tools that landowners use to help them manage 
sustainably. Some are as simple as having a management plan in place 
that specifies both stewardship and economic objectives.
    Others are more complex, like forest certification, which involve a 
third-party audit to see if a forest is meeting specified environmental 
standards. Some states use mandatory or voluntary standards to ensure 
environmental protection.
    To participate in the American Tree Farm System, for example, my 
property is required to be inspected by a qualified forester and then 
certified that it is managed pursuant to a plan that protects the air, 
water, wildlife habitat and the forest's capacity to continue producing 
fiber products in the future. It must be re-inspected periodically to 
make sure the stewardship objectives continue to be met.
    Instead of taking the incredibly complicated and impractical 
approach of trying to manage forests in Federal legislation, Congress 
should rely on these existing tools to ensure sustainability and 
environmental protection.
Create New Markets for Private Forests
    Including family forest owners in a revised Renewable Fuel Standard 
could also help them stay economically viable at a time when the forest 
and paper products industry has been depressed to the lowest levels in 
30 years. Making a living from timber alone has become increasingly 
difficult. These new markets can supplement, not replace existing 
forest products markets.
    Providing an additional income stream to struggling family forest 
owners, by allowing forest biomass from all sustainable sources to be 
included in the Standard, can help them stay on the land and maintain 
the forest in a healthy condition. We should not close these new and 
emerging renewable energy markets to those family forest owners who 
control the majority of forestland. Doing so severely limits the 
effectiveness of the Standard.
    Mr. Chairman and Committee Members, if we truly wish to meet the 
energy goals envisioned in the Renewable Fuel Standard legislation, it 
is essential that a more inclusive definition of sustainable forest 
biomass is adopted.

    We strongly believe Congress should correct the flaws in the 2007 
Renewable Fuel Standard by allowing all sustainable forest biomass to 
be considered ``renewable'' under the Standard. Additionally, as 
Congress considers a Renewable Electricity Standard, we must ensure 
that ALL sustainable forest biomass can to be used in the production of 
renewable electricity to help meet our nation's energy goals. 

    Fixing the Standard will make it more practicable and accessible to 
millions of family forest owners like me. We urgently need this change 
in order to meet our nation's renewable energy goals, encourage 
sustainable forest management, and create new markets for family 
forests.
    Thank you again for this opportunity to testify.
    For additional information, contact:

Rita Neznek,
Vice President for Policy, American Forest Foundation,
[Redacted].
[GRAPHIC] [TIFF OMITTED] 51922.006

        Photo #1: Stand of White Pine, planted in late 80's that should 
        be thinned to remove smaller trees, allow trees left to grow 
        larger and healthier. Smaller trees like one in right corner of 
        photo could be used for renewable fuels markets. However, this 
        is a planted stand, but it is not clear whether this would be 
        considered ``actively managed'' and therefore count as 
        ``renewable.''
        [GRAPHIC] [TIFF OMITTED] 51922.007
        
        Photo #2: A mixed hardwood stand, growing naturally. 
        Eventually, this stand will be thinned, removing some of the 
        trees that are not growing straight or healthy, to make way for 
        the healthy trees to grow. Under the current biomass 
        definition, only the tops and limbs or ``slash'' of these 
        thinned trees could be used

    The Chairman. Thank you, Ms. Webster.
    So the record indicates, we searched for a balance. Does 
anyone have any positive comments about EPA's proposal that was 
released yesterday? I know you haven't had a chance to review 
it.
    Mr. Feraci. They are moving forward with the process. The 
U.S. biodiesel industry right now, we find ourselves in a 
somewhat tenuous situation. We have had what I call a perfect 
storm of events that have come together that have made things 
extremely difficult for biofuels producers. The rule was 
supposed to be finalized and the program implemented January 1, 
2009. We are here in May of this year, and we are just seeing 
it now.
    So moving the program forward and getting it implemented is 
a concept that is a good thing. But, obviously, the assumptions 
that they have made, it is a mixed blessing because then you 
have the indirect land use assumptions that they have made. You 
give with one hand, take away with the other and you disqualify 
vegetable oil feedstocks from being used to produce fuel, and 
that is just going to have to be fixed in the process.
    The Chairman. Dr. Babcock, given a low level of accuracy in 
predicting the land use changes abroad, why do you think EPA 
chose to use the models that they did?
    Dr. Babcock. In my testimony I tried to differentiate 
between changes in land use due to the changes in production 
versus where the land is going to come from. So if you need 
more cropland, where is that land going to come from? Is it 
going to come from increased double-cropping? Is it going to 
come from pasture? Is it going to come from forests?
    That last link in these linked models is where the direct 
weakness is. I think I agree with Dr. Glauber on that, and the 
reason why they did what they did is because, and she referred 
to the Wind Rock model, that is what they had. So if they had 
an objective of trying to estimate land use changes, they went 
to where they could find someone that had some capability of 
doing it, and so that is why they did it.
    The Chairman. Thank you. Mr. Pechart, you did a great job 
of explaining the problems that we face in Pennsylvania trying 
to participate in biofuels and definitions really hurting us. 
But, I wish you would elaborate, particularly for our 
environmental friends, the abandoned mine problem that we have 
in Pennsylvania, and you mentioned the Chesapeake Watershed, 
and we also affect the Delaware Watershed and the Allegheny 
Watershed because of anthracite coal being mined in the 
Northeast and bituminous in the Southwest. If you could just 
elaborate on the problem and if we were able to plant 
feedstocks, switchgrass on these abandoned mines, what it would 
mean environmentally.
    Mr. Pechart. Thank you, Mr. Chairman, and that is a very 
good question. Some interesting statistics. In the eastern 
United States there are 740,000 acres of abandoned mine lands 
right now. It is an incredible number. And, just in 
Pennsylvania alone, we have 180,000 acres of abandoned mine 
lands. That is 2 billion tons of waste coal sitting around 
Pennsylvania, impacting about 4,600 miles of streams.
    For Pennsylvania to clean that up it would cost us $10 
billion, and that is $10 billion we obviously don't have in 
this economy right now. That is $15,000 to $20,000 an acre. We 
have a public-private partnership right now going on and groups 
working to correct this problem, and I will give a good example 
that shows the economic impact of this.
    The state spent $32 million to clean up about 960 acres of 
abandoned mine lands. Companies, utilities which are using 
fluidized bed technology and burning coal cleanly, and also 
restoring abandoned mine lands and planting feedstock crops on 
them that could be used to fuel cellulosic ethanol plants, at 
some point cleaned up 4,500 acres of abandoned mine lands at no 
cost to taxpayers. They used their own private dollars to do 
that.
    So there is a tremendous effort underway in Pennsylvania. 
Feedstocks are going to be part of that. It is going to be a 
huge economic development tool for the communities where all of 
these acres of abandoned mine lands are. And the standard as 
presently proposed would limit the ability or the incentive for 
those utilities that are looking to take the next step in clean 
coal, which is reclaiming the land and producing next 
generation biofuels crops on there from doing so.
    The Chairman. Thank you.
    The chair recognizes the Ranking Member, Mr. Goodlatte.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    Ms. Webster, welcome, and I would like to ask you and Mr. 
Pechart a question about all of these conflicting and ambiguous 
definitions of what is acceptable for use as woody biomass, and 
whether you think that that has inhibited investment in 
renewable energy from wood products.
    Ms. Webster. I certainly think it is going to inhibit the 
investment. As we spoke about in my testimony, I have trees 
that have been planted, but according to the definition if they 
were not planted for woody biomass, can they be used for woody 
biomass? And to try and keep track of one tree from another 
tree as to whether or not it was planted or was not planted, 
when it actually hits the lumberyard, how are they going to 
know that this tree was or was not.
    I think it is an extraordinarily complicated, unnecessarily 
complicated structure.
    Mr. Goodlatte. And when people are thinking about spending 
a significant amount of money to promote woody biomass, they 
are going to worry that they could get into all kinds of 
regulatory problems and may say, well, I will invest in 
something else rather than that.
    Ms. Webster. Precisely. Precisely.
    Mr. Goodlatte. Mr. Pechart, are you familiar with the 
proposed biomass definition in the Waxman-Markey Climate Change 
Bill?
    Mr. Pechart. No, I am not, sir.
    Mr. Goodlatte. Well, I would call your attention to it, 
because it will even further compound the problem that we are 
experiencing with EPA, with the situation we have been talking 
about today, and with the energy bill that we passed 2 years 
ago that had this change made at the last minute in the 
definition of what qualified for biomass.
    Some advocates for the current RFS biomass definition have 
argued that the current definition prevents over-harvesting of 
trees and other feedstocks. Do you believe that it is possible 
the definition has the opposite effect and could potentially 
encourage over-harvesting on the land where it is currently 
allowed?
    That is directed to you, Mr. Pechart.
    Mr. Pechart. I don't think so. As I had indicated in my 
testimony, at one time in Pennsylvania we had a very viable 
paper manufacturing industry, and we were pulling tremendous 
amounts of material. We have one of the largest hardwood stands 
in the United States in Pennsylvania. We were pulling a lot of 
material out of there, but when the paper mill industry started 
to decline, that material was just left in the woods, and it 
remains there today.
    So I don't think right now, and to reference your earlier 
question, I think the segue is very good. The hardwoods 
industry in Pennsylvania right now is just sort of scratching 
their heads, and they are not sure where the future lies. They 
know they have a great resource that is out in their woods. We 
are encouraging them to look at--you need to sort of bring back 
that infrastructure that you once had in place that took all 
that stuff out of the woods and took it to the paper mills. 
That industry has gone away, too, but they are just sort of 
cautious about where this is going to go, and this proposed 
regulation from EPA is not helping them answer a lot of those 
questions right now.
    Mr. Goodlatte. So you would agree with me that the effect 
of discouraging harvesting woody biomass on lands where it is 
prohibited under these convoluted regulations would have the 
opposite affect of putting too much pressure----
    Mr. Pechart. Yes.
    Mr. Goodlatte.--on the lands where it is allowed?
    Mr. Pechart. Yes.
    Mr. Goodlatte. Very good.
    Ms. Webster, what systems and protections do you have in 
place as a landowner to ensure that you are managing your 
forest so that future generations can have the same benefits 
from the forest as you have?
    Ms. Webster. Well, to begin with I have management plans. I 
am involved, as I said, with the tree farms systems. So there 
is a whole set of criteria that make me continue to be a 
certified tree farmer. I have the Department of Forestry in 
Virginia which has best management practices, so any kind of 
cutting and so forth are all regulated and are watched.
    Third, I have, aside from the state regulations, I have a 
plan for the next generation, my kids. This is a family 
operation, so they are already on deck and come to meetings 
with me to be educated about forest management.
    Mr. Goodlatte. Well, thank you, and I hope you are able to 
instill that in your future generations of your family so they 
will continue to do that work and provide----
    Ms. Webster. Absolutely.
    Mr. Goodlatte.--jobs in our Congressional district.
    Ms. Webster. Absolutely.
    Mr. Goodlatte. It is very important, and we appreciate your 
contribution today.
    Mr. Chairman, if I might ask one more question of Mr. 
Pechart. Some groups hail the renewable biomass restrictions in 
the RFS saying that these restrictions help protect forests and 
wildlife habitat. Do you agree with that statement?
    Mr. Pechart. We don't agree with that statement in 
Pennsylvania. Again, a lot of our economy depends upon the 
hardwoods industry. We have a massive amount of state and 
Federal forestlands that create jobs, that put people to work. 
We really believe that the next generation, the next economy in 
Pennsylvania is going to focused around renewable energy, 
whether that is in agriculture or in hardwoods or in the forest 
products industry. And a lot of that is going to deal with 
biomass and getting biomass out of the woods and creating 
energy with it.
    Mr. Goodlatte. Well-managed forests are renewable resource 
for our country, and if you do that, you can have a beneficial 
aspect of protecting the forests. If they overgrow, that is a 
major contributor to problems with insect and disease----
    Mr. Pechart. That is correct.
    Mr. Goodlatte.--infestation, along with forest fires. And 
forest fires getting out of control and being wildfires that 
destroy the forest rather than the natural type of a forest 
fire that can have a regenerative process in the forest.
    So they need to be thinned, and we ought to put the 
thinning to work with biomass and in the process we can improve 
the forest and improve the wildlife habitat in my opinion.
    Thank you both for your contribution. I don't mean to 
exclude the other four. I hope some of the other folks will 
have questions for them because my time has run out.
    The Chairman. The chair thanks the Ranking Member. The 
gentleman from Iowa.
    Mr. King. Thank you, Mr. Chairman. I just want to tell you 
that I have breathed a sigh of relief each time I listen to 
each one of you give your testimony. My blood pressure has come 
down considerably since the first panel.
    And I don't know which one of you I appreciate the most, 
but I appreciate all of your testimony here today. I wanted to 
point out to Mr. Bowdish that the plant that you hail from is 
not only one that we have done some work on, I personally laid 
a fair amount of that storm drain underneath that. I didn't 
just direct that it be done. I mean, actual hands on. So I know 
exactly where you are and how that thing is built from the 
cornstalks on up.
    And you represent a company that is a huge part of the 
number one renewable fuels producing Congressional district in 
America when you add ethanol, biodiesel, and wind together. I 
have never done the math with ethanol and biodiesel, but I 
think that would also be true. We have been number one in 
biodiesel production for quite some time now. I should probably 
stop my commercials and get to some facts here.
    First, Dr. Babcock, as I reviewed your testimony I was 
trying to do a calculation so that I could come to some 
understanding of your center's model that predicts 300,000 
acres would be used per billion gallons of ethanol. And so I 
just do a little scratching, and it looks to me like we could 
probably do that in Iowa for less, fewer acres. And from this 
evaluation, and I went at it the other way, and I just took a 
base of 500 gallons per acre that we can do, and that is pretty 
easily done and did the math on that, and I think I came to 
150,000 acres.
    Anyway, on this math how does that work out, and does it 
have a presumption of an average yield per acre? And then does 
that extrapolate across a lot of complicated factors as I 
understood you? Can you help me understand that model?
    Dr. Babcock. Yes. So what happens is: say you need a 
billion gallons more ethanol, well, you will get more corn 
produced to meet that, but in getting more corn produced you 
are probably taking the land from some other crop somewhere 
else. And so there are all the cross-crop effects, and so the 
net effect of acreage--corn is one of the most productive crops 
around in terms of productivity per acre. If it is pushing out 
another crop that has less production per acre, you have to 
take that into account to get a net acreage affect.
    Mr. King. But when you calculate it, do you have a base 
number that makes a presumption on an annual yield? I am just 
thinking about the difference between Iowa yields and yields 
that you might get at another place that is not the Corn Belt. 
How does that actually extrapolate down through? Do they get to 
the point where on the other end of this equation, at almost 
the other end of the table, but I am actually thinking Brazil. 
And I am trying to put this equation together in my mind about 
we can sequester, I believe, more carbon by raising corn than 
you can by old-growth forests, which we should utilize. But, it 
seems to me that the EPA is thinking in terms of charging 
against corn production the burning of old-growth forests in 
Brazil, and at the same time we are in discussion about how we 
are going to convert timber waste to cellulosic ethanol.
    So when you take that equation down to Brazil and say, 
``Okay, if we can turn it into ethanol here, we can do it there 
if they are going to clear the trees.'' Wouldn't we either make 
houses out of them or turn it into cellulosic ethanol? And 
wouldn't we put that all in our big spreadsheet, our inter-
relational database so that we can do this math and really 
calculate out something that we can look at and have confidence 
that all the numbers balance?
    Dr. Babcock. I will just briefly respond to that because 
there are many, many, many, many spreadsheets that are involved 
because you have many spreadsheets for each country involved. 
If you take 20 million acres of land in the United States, good 
corn land, divert it to fuel production, it will have ripple 
effects as I have heard it described throughout. You have 
identified many issues that need to be taken into account. What 
proportion of Brazil, if there is any change in Brazilian 
forests, what proportion of the wood is used in durable 
housing, for example? And I don't think we fully understand 
that.
    Mr. King. And I appreciate that, and we are only talking 
about a small part of the driving factor behind this, which is 
the idea of global warming itself or climate change itself. And 
so I would just ask this general question to the panel if 
anyone chooses to answer it in my seconds that remain, is there 
any witness on the panel that has analyzed the science that 
lays behind this global warming model that drives this policy 
we are talking about? And if so, do you agree with their 
conclusion that the Earth is getting warmer because we are 
burning fuel into the atmosphere?
    Anyone care to tackle that?
    I would then, Mr. Chairman, let the record show that there 
was no one who volunteered to tackle that question which 
underlies this entire hearing, and I appreciate all the 
witnesses and by the way, the gentleman from Massachusetts, it 
has been awhile since I agreed so much with someone from 
Massachusetts.
    I yield back.
    Mr. Goodlatte. I am from Massachusetts.
    Mr. King. Boy, I am totally embarrassed now, because I do 
agree with Mr. Goodlatte almost every time unless we have a 
regional issue that has to do with agriculture. So I appreciate 
it, Mr. Chairman and Ranking Member. This has been a very good 
hearing, and I am glad I was here to be a part of it.
    The Chairman. The chair thanks the witnesses. Under the 
rules of the Committee the record of today's hearing will 
remain open for 10 calendar days to receive additional material 
and supplementary written responses from the witnesses to any 
question posed by a Member.
    This hearing of the Subcommittee on Conservation, Credit, 
Energy, and Research is adjourned.
    [Whereupon, at 2:00 p.m., the Subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
 Submitted Joint Statement of Hon. John H. Hoeven III, Governor, State 
  of North Dakota; Chairman, Governors' Biofuels Coalition; and Hon. 
  Chester J. ``Chet'' Culver, Governor, State of Iowa; Vice Chairman, 
                     Governors' Biofuels Coalition
    Mr. Chairman and Members of the Subcommittee, as Chair and Vice 
Chair of the Governors' Biofuels Coalition, Governor Chet Culver and I 
are pleased to submit this testimony on behalf of the Coalition. We 
appreciate the Subcommittee providing us with an opportunity to offer a 
state perspective on indirect land-use change and the environmental and 
economic benefits of ethanol, biodiesel, and other biofuels.
    As governors, we have witnessed first hand the benefits that 
biofuels and other renewable resources provide to our states and much 
of the Midwest. Once economically suffering rural communities have been 
revived by the ability of our farms and biorefineries to deliver green 
jobs to our region and clean domestic fuels to all consumers--even as 
the nation's energy experts work toward additional oil alternatives for 
the future.
    The decisive action taken by Congress in support of biofuels in 
2005 and 2007 with the establishment and expansion of the Renewable 
Fuel Standard set a new benchmark for the United States. In less than 5 
years, we have built a multi-billion dollar nationwide infrastructure 
that will soon deliver ten percent of the nation's light duty 
transportation fuel, and biodiesel use for heavy duty vehicles, from 
renewable domestic resources at a competitive price. At the same time, 
despite what biofuels critics say, the nation's farmers are also able 
to provide all the corn we need for domestic and export purposes, 
including the 80 percent of the corn crop that is used as animal feed.
    The debate over how much corn is required for conventional ethanol 
production and the perceived impact this use has on international land-
use change stems from misunderstandings and misinformation about modern 
farming and ethanol production processes. Ethanol production allows the 
same corn to be used for ethanol and livestock feed. The negative media 
of the past 2 years neglects to note that only the starch from the 
kernel of corn is used in ethanol refining. The protein, oils, and 
minerals are all captured and concentrated, and returned to farmers for 
use in livestock rations and emerging value added food products. 
Similarly, in the production of biodiesel from soybeans or other 
oilseeds, only the oil is utilized for the fuel, the remaining meal is 
a high value livestock feed that is rich in protein.
    Last year, ethanol and biodiesel production returned over 23 
million metric tons of livestock feed derived from the ethanol and 
biodiesel refining processes at a cost to livestock producers lower 
than the unprocessed grain they normally buy. This fact is critical in 
providing policy makers the information they need as they consider the 
impact of biofuels feedstock demand growth and the issue of indirect 
land-use change. The use of corn and oilseeds for fuel in no way 
represents a one-for-one disappearance of food from the system, and a 
growing chorus of scientific evidence shows that the U.S. grain based 
biofuels industry is not responsible for changes in international land-
use.
    To illustrate this point, I would like to cite the analysis of Dr. 
Terry Klopfenstein of the University of Nebraska. Dr. Klopfenstein's 
well-documented work shows that the industry standard conversion in a 
dry mill ethanol plant is 2.8 gallons of ethanol for every bushel of 
corn. In 2015, the Renewable Fuel Standard of 15 billion gallons will 
require 5.4 billion bushels of corn. Of this, the equivalent of 2.3 
billion bushels will return to the feed market; netting a 2.8 billion 
bushel corn consumption for the production of ethanol. With this 
consideration, the total net use of corn for ethanol in 2015 leaves 
more corn available for food, feed and industrial uses than there was 
in 2002.
    Such analyses make for hard-to-sell headlines, but they are the 
facts, and we need to set the record straight for consumers and policy 
makers. As a start, the Coalition recommends that the U.S. Department 
of Agriculture report on corn for ethanol use on an adjusted basis to 
reflect the use of distillers' grains as a high-value replacement for 
bulk corn in the animal feed category. Similarly, adjustments should be 
considered for biodiesel and soybean meal.
    The Coalition's concerns about the complexity of indirect land-use 
change are shared by many in the scientific community. More than 100 
scientists wrote to the State of California last year outlining the 
scientific and public policy problems with defining and enforcing 
indirect land-use in a selective (i.e., biofuels only) way. These 
scientists pointed out that most modeling outcomes, by definition, 
assume little innovation. These models could not have predicted the 500 
percent increase in corn yields per acre since 1940, the tripling of 
wheat yields since 1960, or the 700 percent increase in yield that can 
occur if farmers in developing countries adopt higher yield seed 
varieties and more efficient farming practices. Encouraging such 
advances in the developing world should be a priority for foreign 
policy decision makers.
    In addition, policy makers should consider that corn ethanol is a 
critical foundation in the transition to the next generation of 
biofuels. As research and development of feedstocks and technologies 
for cellulosic ethanol and other advanced biofuels continue to evolve, 
the potential for future land-use demands can diminish even as biofuels 
production grows.
    There is no question that global food demand, increasing amounts of 
meat in the diets of citizens of developing nations, and deforestation 
are serious challenges for a growing world. Future fuels of all types 
must be incentivized carefully. At issue with indirect land-use change 
in the context of biofuels is a lack of data and a lack of appropriate 
modeling tools to assess impacts. Further, there have been no serious 
discussions of international treaties that should be used to cover a 
range of industrial and suburban development policies that have 
documentable impacts on forest and farm land destruction in the United 
States and abroad.
    The governors recognize these are complex and time sensitive 
issues, and recently recommended to the President that an interagency 
task force be established on lifecycle greenhouse gas emissions and 
transportation fuels. This high-level task force would include the U.S. 
Department of Agriculture, U.S. Environmental Protection Agency, and 
U.S. Department of Energy, and would be charged with helping to resolve 
the debate over the lifecycle greenhouse gas emissions of biofuels and 
petroleum by requiring a thorough, objective assessment of this issue. 
This process should include an annual update of the lifecycle analysis 
of the drilling, refining and transport of petroleum products as well 
as the indirect emissions associated with military protection of access 
to world oil supplies.
    The U.S. agricultural system and modern ethanol production has 
managed to meet demands for both ethanol and livestock feed. In doing 
so, many in the farm community and biofuels industry have taken serious 
steps to reduce fossil energy inputs, invest in more efficient 
production technologies, and adopt innovative tilling practices. The 
result of these efforts is impressive. For example, a number of 
scientific experts recently wrote in a letter to Secretary Vilsack that 
modern, highly efficient ethanol plants built since 2005 account for 75 
percent of U.S. ethanol production, and that these plants require \1/
10\ of the water needed to produce a like amount of gasoline from crude 
oil.
    In our states, we see documented decreasing fertilizer inputs per 
bushel of corn produced, biotech advances that allow production 
agriculture to feed more people for less money, and a desire by farmers 
and refiners to do even more. Without the advances achieved by these 
industries, urban life and a quality environment could not exist as we 
know it.
    To be sure, the biofuels and agricultural industries have much to 
do to achieve greater levels of environmental sustainability, as do 
nearly all sectors of the American economy. To address this issue in a 
more constructive manner, the Coalition recently recommended to the 
President that the U.S. Department of Agriculture take the lead in 
bringing together biofuels industry representatives; environmentalists; 
state agricultural, energy, and environmental experts; and others to 
explore immediate policy options to achieve continuing improvement in 
energy water use efficiency, reduced fertilizer use, better tilling 
practices, improved water quality, and conservation of wildlife 
habitats. The governors intend this action to produce pragmatic, 
immediate steps that will improve the sustainability of biofuels and 
other agricultural products over the long term.
    It is the Coalition's goal to continue to work with renewable fuel 
producers, farmers, environmental interests, and others to enhance 
biofuels productivity, efficiency, and sustainability. We look forward 
to working with Congress and the President to provide a pathway to a 
cleaner and more sustainable--economically and environmentally--
transportation fuel future for our states and the nation.
                                 ______
                                 
   Submitted Statement of William E. Flederbach, Jr., Executive Vice 
              President, ClimeCo; on Behalf of PetroAlgae
    Thank you Chairman Holden, Ranking Member Goodlatte, and Members of 
the Subcommittee for this opportunity to submit a statement for the 
record. My name is William Flederbach, Jr., Executive Vice President of 
ClimeCo and I am submitting this statement for the record on behalf of 
PetroAlgae.
    PetroAlgae is a renewable fuel company commercializing the next 
generation technologies to grow and harvest oil and high protein feed 
from micro-crops. Micro-crops include algae, micro-angiosperms, 
cyanobacter, diatoms, and other very small aquatic organisms which grow 
very quickly and thus produce much more biomass per acre per day than 
conventional terrestrial macro-crops can. Very high productivity per 
unit of land area, combined with high yields of both fuel and edible 
proteins, makes PetroAlgae's micro-crop-based process a renewable, 
carbon-neutral, food-contributing, cost-effective substitute for 
petroleum-based fuels. PetroAlgae uses naturally selected strains of 
micro-crops to produce rapid growth and high fuel yield. The process 
can be engineered on a massive commercial scale, creating the 
opportunity to produce a cost effective alternative to fossil fuels and 
high-protein animal feed while absorbing CO2 from green 
house gas emissions (GHG). Expecting to begin commercial deployment in 
2009 and opening a commercial scale pilot facility later this year, 
PetroAlgae is engaging with licensing prospects throughout the world. 
PetroAlgae offers a path to sustainable and clean energy independence 
through a process that is scalable globally.
    PetroAlgae's process of growing and harvesting micro-crops for 
feedstock for petroleum products actively reduces CO2. This 
can be achieved without the need to store the captured CO2. 
Micro-crops are carbon neutral in that they capture more CO2 
from the atmosphere than that which is released when the biofuel is 
ultimately consumed.
Micro-Crop Global Benefits
    Micro-crops have always been a critical component in the overall 
atmospheric CO2 balance and serve as a negative feedback 
mechanism to the melt of icebergs. When icebergs melt, surface level 
albedo decreases. Albedo is found in ice and in clouds and acts to 
reflect shortwave radiation from the sun, thus decreasing the amount of 
long wave radiation emitted from the Earth (heat). However, when ocean 
surfaces increase, the amount of photosynthetic micro-crop also 
increases, acting as a negative bias to the impact of iceberg melt. The 
tiny photosynthetic micro-crops are an important food source in the 
Arctic marine ecosystem. They also absorb carbon dioxide from the 
atmosphere. As sea ice shrinks from warming, the micro-crops could play 
an important role in slowing climate change. The micro-crop process is 
very similar to the naturally occurring absorption process and serves 
to effectively absorb CO2 from both the atmosphere and 
eventually from dedicated point sources of CO2 (coal 
utilities and more).
CO2 Emission in the United States
    In the most recent Annual GHG Inventory report published by the 
United States Environmental Protection Agency (Agency, April 2009), 
total CO2 emissions from fossil fuel combustion reached a 
staggering 5,736 million tons in 2007, up from 5,635 million tons in 
2006. This category includes fossil fuel combustion in electricity 
generation, transportation, and industrial, residential, commercial use 
in the U.S. and its territories. A further breakdown of this data is 
discussed below.
    In 2007 CO2 emissions from fossil fuel combustion for 
electricity generation increased to over 2,397 million tons per year, 
up from 2,237 million tons in 2006. The release of CO2 from 
the use of fossil fuels in industry (cement, steel, and others) also 
increased to over 845 million tons, up from 844 million tons in 2006. 
The upward trend is clear, as is the need for alternative 
CO2 abatement technologies.
Current CO2 Reduction Approaches--Electricity Generation and 
        Industrial
    In the past, the majority of CO2 abatement technologies 
in the electricity and industrial fossil fuel arenas have focused on 
carbon capture, both pre-combustion and post-combustion.
Post Combustion CO2 Capture
    Carbon dioxide capture is most commonly based on chemical 
absorption, where the flue gas is brought into contact with a chemical 
absorbent with an ability to attach the CO2. Typical 
absorbents are amines and carbonates.
    The scrubber column is designed to ensure the exhaust gas and the 
absorbent are brought into close contact with each other. The 
CO2 is then transferred from the flue gas to the absorbent, 
and there are two out-going flows from the scrubber column; a cleaned 
gas-stream with low CO2 content and liquid-stream containing 
water, absorbent and CO2.
    After the absorption process, the absorbent and the CO2 
are separated in a regeneration column. When heated, the absorbents' 
ability to retain CO2 is reduced, resulting in regeneration 
of the absorbent, which can then be re-used. The CO2 leaves 
the regeneration column as a gas stream of high CO2 purity. 
This gas can be transported to a CO2 storage site or micro-
crop farm. Approximately 80 to 90 percent of the CO2 from a 
power plant can typically be removed by post-combustion CO2 
capture.
    A major stumbling block hindering capture of CO2 
produced by fossil fuel combustion has been the extra cost and energy 
penalty associated with using the most common chemical scrubber 
absorbers. Employing the scrubbers in the power plants may reduce net 
power output by approximately \1/3\ and raise the cost of electricity 
produced by 60-80%. Currently, the Electric Power Research Institute 
(EPRI) is evaluating alternative processes to reduce the loss of power 
and limit the increase in electricity costs. (EPRI, 2006)
Pre-Combustion CO2 Capture
    Additionally, CO2 can be separated from the fossil fuel 
before combustion. The principle of this process is first to convert 
the fossil fuel into CO2 and hydrogen gas (H2). 
Then, the H2 and the CO2 is separated in the same 
way as under post-combustion, however a smaller installation can be 
used. This results in a hydrogen-rich gas which can be used in power 
plants or as fuel in vehicles. The combustion of hydrogen does not lead 
to any creation of CO2.
    The pre-combustion CO2 capture is applicable to new coal 
power plants. There has been significant focus on the integrated coal 
Gasification Combined Cycle (IGCC) technology, where the power is 
produced from combined hydrogen combustion and from a steam turbine. 
Pre-combustion CO2 capture is also applicable for natural 
gas power.
    By pre-combustion CO2 capture about 90 percent of the 
CO2 from a power plant can be removed. As the technology 
requires significant modifications of the power plant, it is only 
viable for new power plants, not for existing plants.
Current Status of CO2 Capture
    As of today, no power plants or industrial sources with 
CO2 capture have been realized. The reasons being are the 
significant financial risk associated with technological investments 
and lack of infrastructure for capture, transportation and storage. 
(International Energy Agency (IEA), 2007).
PetroAlgae Alternative
    Although there are some additional new and novel technologies being 
explored such as membrane filters, adsorption and chemical looping, all 
of these remain very costly and full of inherent process risks.
    PetroAlgae's process serves as a very viable alternative to the 
often controversial storage of the captured carbon from scrubbing and 
other technologies previously reviewed. Although micro-crop farms will 
absorb ambient concentrations of CO2, micro-crop farms will 
likely be located adjacent to CO2 producing facilities, like 
power plants, resulting in potentially significant CO2 
sequestration benefits.
    Production of alternative transportation fuels from micro-crops 
will help reduce the amount of CO2 in the environment 
without the need to store the captured CO2. Micro-crops 
provide a carbon-neutral fuel because they consume more CO2 
than is ultimately released into the atmosphere when micro-crop-based 
fuel burns. The amount of carbon removed from the environment will 
depend on the number of micro-crop farms built and the efficiency with 
which micro-crops can be modified to convert CO2 to fuel 
products.
Distinct Advantages Over Other CO2 Capture and Storage 
        Techniques
    Much of the world's oil and gas is made up of ancient micro-crop 
deposits. Today, the micro-crop technology will produce ``new oil'' 
through a cost-effective, high-speed manufacturing process. This 
endless supply of new oil can be used for many products such as diesel, 
gasoline, jet fuel, plastics and solvents without the global warming 
effects of petroleum.
    Other bio-fuel feedstock such as corn and sugarcane often destroy 
vital farmlands and rainforests, disrupt global food supplies and 
create new environmental problems. The micro-crop technology is 
targeted at fundamentally changing our source of oil without disrupting 
the environment or food supplies. Instead of drilling for old oil, 
PetroAlgae can now manufacture clean, new oil, anytime and anywhere, 
delivering a revolutionary breakthrough to the world.
    In addition, the absorption of CO2 in micro-crops is a 
distinct advantage over the capture and storage of CO2 in 
abandoned mine sites and other geological formations around the Earth. 
The liability issue for carbon capture and storage (CCS) can be framed 
in terms of operational liability and post injection liability. 
Operational liability includes the environmental, health and safety 
risks associated with CO2 capture, transport and injection.
    There are two types of post injection liability: the in situ 
liability of harm to human health, the environment, and property, and 
the climate liability related to leakage of CO2 from 
geological reservoirs and the effect on climate change. In general, 
post injection liabilities pose a unique set of challenges because of 
the scale of proposed CO2 storage activities, the long 
timeframe over which the risks may manifest themselves, and the 
uncertainties of the geophysical systems. (Mark de Figueiredo et al., 
2004)
    Although the micro-crop process will have a small impact the 
operational liability associated with the capture of CO2, it 
will greatly improve the risks associated with post injection 
liability. The captured CO2 will be beneficially reused in 
the growth of the micro-crop and its end use of a biofuel, thus 
converting a liability into an asset.
Conclusion
    PetroAlgae systems are designed to make money as fuel and food 
producers, so they have the potential to change CO2 capture 
from a dead-weight-cost process to a profit-making process. We are not 
aware of any other CO2 capture technology that has the 
potential to be a money-maker instead of a money-loser at large scale. 
The benefits of PetroAlgae's process are extensive and needs the 
support of the U.S. Government to accelerate the technology design and 
full-scale implementation.
                                 ______
                                 
  Submitted Statement of Dennis Griesing, Vice President, Government 
                Affairs, Soap and Detergent Association
    The Soap and Detergent Association (SDA) is an over 100 member 
national trade association representing the formulators of soaps, 
detergents, general household cleaning products, industrial/
institutional cleaners as well as the companies that supply ingredients 
and packaging to the formulators, including the oleochemical industry.
Oleochemicals: The Original Green Chemical Industry
    The oleochemical industry is the original ``green chemical'' 
industry. For over 100 years in the United States, the industry has 
turned ``animal fats'' into fatty acids, fatty alcohols and other 
biobased chemicals that are widely used to manufacture soaps, 
detergents, personal care products, paper, plastics and tires.
    The interrelationship of oleochemicals and biofuels is based on 
their shared ``animal fats'' feedstocks, e.g., tallow, white grease and 
yellow grease and brown grease. While the United States oleochemical 
industry is principally based on tallow, other fats and greases are 
also used.
    Since biodiesel and renewable diesel can also be made from ``animal 
fats,'' government programs which subsidize or force a demand for 
animal fats-based fuels, e.g., biodiesel tax credits, the alternative 
fuel credit and the Renewable Fuel Standard (RFS), put the oleochemical 
industry at an extreme economic disadvantage. This green industry 
should be applauded by government, but instead Federal biofuel policies 
have persistently threatened its continued viability as a domestic 
industry. If this material is lost to the industry, the logical 
replacement for tallow is palm oil.
    The consequence of this is that all products would likely be made 
offshore and imported to the United States. Not only would oleochemical 
producers be put out of business but impacted consumer product 
manufacturing could be sent offshore as well. And, since palm oil 
production results in deforestation, the ILUC issue would simply be 
sent offshore as well.
    Or, the oleochemical companies, in order to stay in business, could 
turn to petroleum-based substitutes. Either outcome would be profoundly 
ironic if it resulted from renewable fuels policies.
Indirect land Use Changes (ILUC) Impact on Oleochemicals
    SDA is concerned that the inclusion of ILUC calculations at this 
point in time will disqualify plant-based renewable and biodiesel for 
purposes of the new Renewable Fuel Standard (RFS2). The consequence of 
this will be to drive producers of biomass-based diesel and biodiesel 
to animal fats as a feedstock with the result that the oleochemical 
industry will lose its critical raw material base because it will be 
consumed by biofuels.
    The animal fats pool is insufficient to meet the RFS2 target for 
biodiesels in any event. So, even after it was all drawn off from the 
oleochemical market, the standard would still not be met.
    Moreover, the supply of animal fats is inelastic; livestock 
production is geared to food supply, not fuel. No one is going to 
increase herd size for biofuels production. Animal fats are a co-
product of livestock slaughter, not a demand driver. Consequently, 
there is no rational prospect that production will increase 
significantly. Annual production has been essentially flat for several 
years.
    Animal fats-based diesels, whether biodiesel or renewable diesel, 
also pose challenges for cold weather use. At lower temperatures, there 
are so-called ``cloud point'' issues with such fuels which result in 
clogged fuel filters and lines. Reducing these can be overcome to some 
degree by processing or putting special heaters and on trucks. All of 
this, however, adds costs. As a result, animal fats-based diesel is 
generally considered seasonal.
    In SDA's view, disqualification of plant-based fuels under the RFS2 
will effectively undermine the program. It will, de facto, create a 
non-expandable, seasonal RFS animal fats-based diesel program. The 
vision of the RFS2 simply cannot be realized without plant-based 
products leading the way into the future. Moreover, again, it stands to 
severely damage or eliminate the domestic oleochemical industry.
    Based on the materials which SDA has reviewed, the science 
underpinning ILUC calculations is unsettled and evolving. If the 
outcome of incorporating ILUC considerations with respect to RFS2 is, 
as many anticipate, a disqualification of plant-based green diesels, 
both the RFS2 program will be threatened and the domestic oleochemical 
industry will see its raw material pool disappear when green diesel 
producers turn to animal fats, despite their significant limitations. 
SDA would submit that both these consequences ought to be avoided as a 
matter of energy policy and national interest.
Renewable Biomass Provisions
    SDA's concerns with the renewable biomass provisions have 
principally to do with the definition of ``renewable biomass'' which 
includes ``Animal waste material and animal byproducts.''
    Animal byproducts, e.g., the tallows and greases noted above, have 
long, well established markets in oleochemicals as well as pet foods 
and other applications. While in general, all the other stipulated 
constituents of ``renewable biomass'' are either expandable crops or 
genuine waste products without pre-existing markets; animal-fats are 
traded as commodities, have a recognized economic value and are a 
critical raw material for an existing industry. Neither are they 
wastes: the price per barrel for tallow is similar to and at times 
higher priced than a barrel of crude oil. SDA believes that 
reconsideration of their inclusion ought to be undertaken. They ought 
not to be included in this definition.
    A precedent for such consideration is found at Section 932(a)(C)(i) 
of the ``Energy Policy Act of 2005.'' In defining biomass derived from 
``forest-related'' materials the phrase ``. . . or otherwise non-
merchantable material'' is applied. The clear implication of this is 
that material which otherwise has a market is excluded from the 
definition. SDA would respectfully urge that similar language be 
included in the current ``renewable biomass'' definition.
Summary
    It is essential that the potential benefits of renewable fuels not 
be purchased at the cost of the continued viability of other 
industries. From SDA's perspective, our national energy policy with 
respect to renewable fuels is facing an unintended train wreck caused 
by a confluence of well intentioned and laudable goals. SDA believes 
that it is essential that we stand back and reassess the energy policy 
landscape.
            Respectfully submitted,

Dennis Griesing,
Vice President, Government Affairs,
[Redacted].
                                 ______
                                 
          Submitted Statement of American Soybean Association
    The American Soybean Association (ASA) thanks the Subcommittee for 
holding this hearing to examine the impact of indirect land use and 
renewable biomass provisions in the expanded Renewable Fuel Standard 
(RFS2).
Importance of Biodiesel
    ASA has a great interest in the development and implementation of 
the RFS2, especially for biodiesel. Biodiesel is the cleanest burning 
biofuel currently used in commercial markets. Biodiesel is a renewable 
and sustainable energy source that can play a significant role in our 
national efforts to increase our energy security and improve our 
environmental footprint. Biodiesel has also provided a significant 
market opportunity for U.S. soybean farmers and jobs and economic 
development for rural communities. These facts make it difficult to 
understand why soy biodiesel would be excluded from the RFS2.
    Biodiesel production in the United States has predominantly 
utilized soybean oil as a feedstock. While other feedstocks are 
becoming more viable, soybean oil remains the primary feedstock of 
choice for U.S. biodiesel production. As a result, biodiesel has 
provided a significant market opportunity for U.S. soybean producers by 
increasing demand for soy oil. Soybeans are produced primarily for the 
soy meal that is used in the feed and food market. Historically, there 
have been surplus stocks of soy oil that have resulted in depressed 
prices for soybeans and restricted markets for soybean farmers.
    The biodiesel industry is creating valuable green jobs and making a 
positive contribution to the economy. In 2008 alone, the U.S. biodiesel 
industry supported over 51,000 jobs, added over $4 billion to the 
nation's Gross Domestic Product (GDP) and generated over $866 million 
in tax revenue for Federal, state and local governments.
    Despite the many benefits it provides, the U.S. biodiesel industry 
is facing severe economic hardship today. The difficulty accessing 
operating capital as a result of the current credit crisis, the 
volatility in commodity markets, reduced demand, and inability to 
compete in the European marketplace are making it difficult for 
producers to sell their fuel. In addition, uncertainty over Federal 
policy, such as the extension of the biodiesel tax credit and the 
implementation of the RFS2, is undermining investor confidence in the 
industry.
    The National Biodiesel Board (NBB) estimates that absent any change 
in Federal policy, U.S. biodiesel production will likely fall to 300 
million gallons in 2009, which would cost the U.S. economy more than 
29,000 jobs. If prolonged, this downturn will lead to a severe 
retraction in U.S. biodiesel production capacity.
Renewable Fuel Standard (RFS2)
    ASA believes that an expanded RFS2 that includes a specific minimum 
use requirement for biomass-based diesel is a necessary and beneficial 
program. The RFS2 is necessary to move the country toward our goals of 
energy independence and clean, renewable energy production. As the 
current market demonstrates, the production and use of biofuels is not 
economically viable when petroleum prices are low. Coupled with the 
extension of the biodiesel tax credit, the RFS2 could provide some 
much-needed market certainty for U.S. biodiesel production.
    Under the Energy Independence and Security Act (EISA) of 2007, to 
be eligible for the new RFS2, biodiesel must meet a 50% greenhouse gas 
(GHG) reduction relative to petroleum diesel. When calculating the 
lifecycle GHG impact of biofuels, the statute directs EPA to consider 
direct and indirect emissions, including indirect land use, of all 
stages of the fuel and feedstock production. As a point of reference, 
under the existing GREET model used by the U.S. Environmental 
Protection Agency (EPA) and the U.S. Department of Energy, biodiesel 
achieves a 78% GHG reduction relative to petroleum diesel. The primary 
area of concern and disagreement has emerged over the international 
indirect land use assumptions that EPA has proposed to use in 
conducting their updated lifecycle GHG analysis.
Indirect Land Use
    Indirect Land Use Change (ILUC) refers to the GHG emissions caused 
by land converted to crop production globally. While we have not had 
time to fully assess the EPA Proposed Rule on RFS2 implementation, our 
initial review suggests that it is significantly flawed, and it does 
unnecessary harm to the competitive position of the U.S. soy biodiesel 
industry. EPA has included, in the proposed rule, numbers on the 
lifecycle greenhouse gas emissions of soy oil biodiesel that are 
derived from faulty assumptions, flawed analysis, and misplaced 
penalties.
Flaws in EPA Assumptions
    We see numerous potential flaws in the approach EPA is using for 
indirect land use changes in its proposed rule. Further, there are 
numerous factors that we believe refute the possibility that 
significant international indirect land use change would result from 
the relatively small increase in U.S. biodiesel production called for 
under the RFS2:

    1. The method used by EPA to measure indirect land use is new and 
        untested. There is neither consensus in the scientific 
        community nor a widely accepted methodology that could be 
        deemed credible to accurately calculate the impact of U.S. 
        biofuels production on international land use decisions.

    2. Land use change has been going on around the world for many 
        years, long before biodiesel was produced in the U.S. The EPA 
        analysis uses land converted to cropland from 2001-2004 and 
        extrapolates that into the future. Since there was very little 
        U.S. soy biodiesel produced from 2001-2004, it is unclear how 
        EPA justifies attributing future land conversion to soy 
        biodiesel. Other market factors (urbanization, world population 
        growth and dietary changes, timber and hardwood prices, etc.) 
        impact and drive land use change decisions. In a recent 
        interview Paulo Adario, director of Greenpeace's Amazon 
        deforestation campaign said, ``Biodiesel demand for soy oil is 
        not seen as a significant driver of Amazon deforestation. Most 
        of the soya grown in Brazil, including what is grown on illegal 
        plantations, is for animal and human consumption; and right 
        now, the Brazilian government is investing in other feedstocks 
        for the development of its biofuels program.'' \1\ Clearly soy 
        biodiesel is not driving land use change and any land use 
        change that is occurring certainly cannot be solely attributed 
        to U.S. biofuels.
---------------------------------------------------------------------------
    \1\ Nicholas Zeman, ``Greenpeace: Biodiesel Not Seen as Significant 
Driver in Amazon Deforestation'' Biodiesel Magazine,  May 4, 2009.

    3. Other market factors, including input and transportation costs, 
---------------------------------------------------------------------------
        determine to what use farmers will put their land.

    4. As an example, if Brazilian land use change is a key factor, 
        then past and recent trends in Brazilian soy planted area 
        should be a telling data point. In fact, Brazilian soy area 
        increased most significantly in years prior to the existence of 
        U.S. biodiesel production. In the last 5 years, when U.S. 
        biodiesel production has increased exponentially, Brazilian soy 
        area has remained relatively flat.

    5. Yield increases by U.S. soybean farmers will play a significant 
        role in meeting biofuel feedstock demand by producing more 
        soybeans on the same amount of land. Historical data tell us 
        that productivity gains and yield increases occur for U.S. 
        agriculture. Over the 25 year period from 1981-2006, U.S. 
        soybean farmers increased their yield from 30 bushels per acre 
        to 43 bushels per acre. This equates to an average yield 
        increase of \1/2\ bushel per acre per year. This represents the 
        minimum productivity increase that is likely to occur. With 
        technologies currently in development, the yield increases 
        going forward are expected to surpass those we have achieved 
        over the past 25 years. U.S. seed technology companies are 
        projecting that current soybean yields will double by 2030.

    6. An increase of 300 million gallons of biodiesel (from 700 
        million to 1.0 billion gallons) under the RFS2 should not 
        result in the substantial land use ``penalty'' being ascribed 
        to U.S. soy biodiesel by EPA. From a starting point of 78% GHG 
        reductions under the GREET model, any reasonable land use 
        ``penalty'' that might be justifiably attributed to U.S. soy 
        biodiesel should certainly not result in pushing soy biodiesel 
        below the 50% GHG reduction threshold required under the 
        statute.

    7. Other measures are being implemented to address land use change 
        for certain sensitive areas, such as the Amazon region in 
        Brazil. An example is the Soy Moratorium, a pact signed by 
        multinational soybean trading companies, Non-Governmental 
        Organizations (such as Greenpeace and The Nature Conservancy), 
        and the Brazilian Ministry of Environment which restricts the 
        marketing or purchasing of soybeans from any newly deforested 
        areas in the Amazon. The trading companies that signed onto the 
        moratorium account for 95% of the soybeans marketed from the 
        primary soybean growing region of Brazil.

    8. We question whether the indirect emissions of diesel (the 
        baseline against which biodiesel is being measured) are 
        adequately factored into the baseline.

    9. The statute does not require EPA to include international 
        indirect emissions in their lifecycle analysis for biofuels. 
        There appears to be a far greater degree of confidence among 
        the scientific community in the ability to measure ILUC that 
        may or may not occur in the United States as a result of 
        biofuel demand. Extending the ILUC analysis globally creates 
        far more uncertainty. Since the EISA statute only requires that 
        EPA measure, ``. . . the aggregate quantity of greenhouse gas 
        emissions (including direct emissions and significant indirect 
        emissions such as significant emissions from land use changes), 
        as determined by the Administrator,'' we do not believe that an 
        EPA lifecycle analysis that attempts to measure international 
        ILUC would be necessary or appropriate at this time.
Intent of Congress
    It was not the intent of Congress for soy biodiesel to be excluded 
from the RFS2. If soy biodiesel is excluded, the biomass-based diesel 
schedule under RFS2 cannot be achieved. There are simply not enough of 
other biodiesel feedstocks to produce the amount of biodiesel called 
for in the RFS2. This is a clear indication that Congress did not 
intend to exclude soy biodiesel from the RFS2. The 50% GHG level that 
biodiesel must meet to qualify for the RFS2 is arbitrary. The GHG 
thresholds were established at different levels for different fuels and 
existing ethanol plants were exempted from the GHG threshold 
altogether.
Conclusion
    ASA has a great interest in the development and implementation of 
the RFS2, especially for biodiesel. Soy biodiesel is one of the 
cleanest burning biofuels in commercial existence today. It is a 
renewable and sustainable energy source that can play a significant 
role in our national efforts to increase our energy security and 
improve our environmental footprint. Biodiesel has also provided a 
significant market opportunity for U.S. soybean farmers and jobs and 
economic development for rural communities.
    The approach EPA is using for their proposed rule on RFS2 
implementation appears to be significantly flawed and would do 
unnecessary harm to the competitive position of the U.S. soy biodiesel 
industry.
    Again, ASA thanks the Subcommittee for holding this hearing to 
examine the impact of indirect land use and renewable biomass 
provisions in the RFS.
                               Attachment
American Soybean Association
Indirect Land Use & the Renewable Fuel Standard (RFS2)
Talking Points
   EPA's proposed rule inaccurately attributes significant 
        international land use change to soy biodiesel production in 
        the U.S.

   A lot of factors, such as urbanization, population 
        increases, dietary changes, market economics, hardwood prices, 
        etc. go into land use changes.

   U.S. biofuels do not drive international land use decisions 
        and certainly cannot be singled out for responsibility for all 
        land use changes.

   If soy biodiesel is excluded, the biomass-based diesel 
        schedule under RFS2 cannot be achieved.

   It was not the intent of Congress for soy biodiesel to be 
        excluded. They would not have set the schedule at levels that 
        can only be met if soy biodiesel is included.

   The 50% GHG level that biodiesel must meet is arbitrary. 
        Existing ethanol plants are exempt and do not have to meet any 
        GHG reduction threshold.

   The statute does not require EPA to include international 
        indirect emissions in their lifecycle analysis for biofuels.

   There is neither consensus in the scientific community nor a 
        widely accepted methodology that could be deemed credible to 
        accurately calculate the impact of U.S. biofuels production on 
        international land use decisions.

   Under the EPA Proposed Rule, the only existing biofuel 
        excluded from the RFS2 would be soy biodiesel, which is one of 
        the cleanest biofuels in existence.
                                 ______
                                 
       Submitted Statement of Biotechnology Industry Organization
    The Biotechnology Industry Organization (BIO) is pleased to provide 
this written testimony on the critically important topics of the impact 
of indirect land use and the renewable biomass provisions in the 
renewable fuel standard (RFS). BIO thanks the Committee for its 
continuing leadership in agriculture and advanced biofuels.
    BIO is the world's largest biotechnology organization, with more 
than 1,200 member companies worldwide. BIO represents leading 
technology companies in the production of conventional and advanced 
biofuels and other sustainable solutions to energy and climate change. 
BIO also represents the leaders in developing new crop technologies for 
food, feed, fiber, and fuel.
    BIO supports efforts to reduce the carbon intensity of 
transportation fuels and believes that biofuels can and must contribute 
significantly to this important objective. Climate change is an urgent 
global issue, and Congress is to be commended for its leadership in 
addressing the contribution of transportation fuels to greenhouse gas 
emissions (``GHGs''). The growth of biofuel production can be done the 
wrong way or it can be done the right way. The advanced biofuels 
community supports building this industry in the most responsible and 
sustainable way possible.
    On the issue of the renewable biomass definition in the RFS, BIO 
believes that the successful evolution of the biofuels industry towards 
next generation technologies will depend critically on the availability 
of sustainable sources of cellulosic biomass and other advanced 
feedstocks throughout the country. Any unnecessary restrictions on the 
eligibility of advanced feedstocks under the RFS are likely to hamper 
the deployment of these next generation technologies. BIO urges 
Congress and the responsible agencies to ensure that all feedstocks 
that can be produced and harvested sustainably are made eligible for 
the biofuels mandates of the RFS.
    On the issue of indirect land use change (``ILUC''), BIO recognizes 
that land use is an important component of climate and that possible 
ILUC impacts of biofuels production should be examined. However, 
current ILUC modeling is incapable of providing reliable indirect 
emissions estimates at this time. Modeling indirect global land use 
effects is a very complex undertaking. While direct impacts of 
production are relatively certain and traceable to the production, 
transportation and combustion of biofuels, indirect impacts are 
affected by a vast array of market and policy particulars and no model 
currently exists to accurately assess these factors. We do believe, 
however, that new and better models will be available in the near 
future.
    There is currently no standardized modeling methodology or agreed 
data input for ILUC modeling. No ILUC model today comes close to 
capturing the interplay of economic, institutional, technological, 
cultural and demographic variables inherent in quantifying the indirect 
impact of a given fuel in an international setting. In fact, the 
economic equilibrium models being used by EPA in their proposed rule 
for the lifecycle analysis of GHG emissions from renewable fuels as 
required by the Energy and Independence Security Act of 2007 (EISA) 
were not designed for regulatory use--i.e., to assign specific 
compliance metrics to specific fuels. Minor changes in any number of 
assumptions about biofuel production, agricultural economics, or land 
use policy can dramatically affect the outcome of current ILUC models. 
While EPA is making every effort to produce a capable model, the simple 
fact that they are having to link together several separate models that 
were all designed for different purposes suggests how embryonic the 
model development process is.
    For example, in the proposed rulemaking, EPA has used the Global 
Trade Analysis Project (GTAP) model to test the robustness of the 
FASOM, FAPRI and Winrock results. GTAP is a multi-region, multi-sector, 
computable general equilibrium model that estimates changes in world 
agricultural production, which is housed in the Department of 
Agricultural Economics at Purdue University. The GTAP model seeks to 
project international land use change based on the economics of land 
conversion and the relative land use values of cropland, forest, and 
pastureland. BIO believes there are many factors ignored in the GTAP 
modeling of indirect land use changes. Chief among these are the many 
factors driving conversion of land in less developed countries. Poverty 
and efforts to escape poverty are a leading cause of land-use change. 
Uses of marginal land in less developed countries are changing rapidly 
due to factors other than biofuel production in the United States and 
other industrialized nations. Productivity of farm land in less 
developed countries may rise sharply, reducing the demand for land 
conversion attributable to lost food stocks from biofuel production in 
the United States. The list of relevant factors goes on and on. Set 
against this complexity is a simplistic conversion rate built into the 
GTAP model. This parameter is neither validated nor capable of 
validation with available world-wide macroeconomic and land use data. 
Thus, at its core the GTAP model is plagued by ``needless 
uncertainty.''
    A paper published by the National Academy of Sciences in 2007 found 
that the complex factors that drive land use change globally ``tend to 
be difficult to connect empirically to land outcomes, typically owing 
to the number and complexity of the linkages involved.''  \1\ In a 
compendium of papers from a conference of 75 leading scientists in 
September 2008, under the auspices of the SCOPE workshop in Germany, 
the leading paper on land-use change concludes that ``assessment of the 
GHG implications of land use and land conversion to biofuel crops is a 
very complex and contentious issue. A complete assessment of the GHG 
implications would require an accounting [of numerous international 
activities for which] the present assessment is limited due to the lack 
of data required to address all of these issues.'' \2\ Thus, the best 
scientific assessment of indirect land-use change is that currently 
available global economic models are not robust, and that parameters 
and output calculations cannot be validated with available data. The 
accuracy of any values produced by such a modeling exercise, and thus 
whether the indirect land use effects rise to the ``significant'' level 
stipulated in the legislation for consideration, is therefore seriously 
under question.
---------------------------------------------------------------------------
    \1\ Turner et al., 2007 [obtain report for page citation].
    \2\ Proceedings of the Scientific Community on Problems of the 
Environment (SCOPE), Ch. 6, p. 112-13 (2009). [insert title of article]
---------------------------------------------------------------------------
    Indirect land use assessment in relation to lifecycle GHGs has 
profound implications not just for biofuels, but potentially for all 
agricultural activity, and arguably climate policy the world over. 
First, by applying ILUC penalties to biofuels, effectively U.S. 
businesses are assuming responsibility for land use decisions--and the 
resulting carbon emissions--of individuals and nations around the 
world. This is a serious policy decision that could well set a 
precedent for all areas of economic activity, and would serve as 
potential validation of the position of China and other nations who 
seek to shift the responsibility for at least a portion of their 
domestic carbon emissions to the U.S. and other developed nations.
    Second, if ILUC penalties are applied to biofuel feedstock 
producers, these penalties should arguably be applied to all 
agricultural producers and other land users. If this is the direction 
Congress and others seek to pursue, we needs to approach this radical 
shift in regulatory policy very carefully, and with the greatest 
possible flexibility, to minimize economic harm and other unintended 
consequences.
    Thus, it is critical that any such regulations are approached with 
the utmost care, open-mindedness, and flexibility. To deliver the 
maximum real GHG reductions, the computation of lifecycle GHG profiles 
must: (1) follow consistent applied and thoroughly vetted methodology; 
(2) be based on contemporary and complete data; and (3) account for and 
encourage a range of future technology advances to ensure continued 
reductions in the carbon intensity of the country's fuel mix.
    The role of land use in GHG sequestration and emissions is a 
serious climate change issue, which should be addressed in a 
comprehensive and consistent way in state, Federal and, indeed, 
international climate change policies and programs. As the 
representative of the biotechnology community, BIO expects to be an 
active supporter of and participant in programs designed to reduce GHG 
emissions attributable to land use and to increase permanent GHG 
sequestration through improved land management practices. We believe 
that a rigorous scientific and economic analysis of ILUC effects of 
biofuels production will demonstrate that first and next generation 
biofuels produced in the U.S. make a positive contribution to reducing 
the carbon intensity of transportation fuels and overall GHG emissions. 
It is critical that at this early juncture for state, Federal and 
international regulation of GHGs and carbon, regulatory agencies should 
develop a rigorous and consistent scientific approach to identifying 
and measuring GHG effects of indirect land use change attributable to a 
variety of activities, including the production of alternative fuels.
    The critical question is whether the ILUC methodology and 
calculations are sufficiently rigorous and robust at this time. BIO 
submits the answer to this question is, emphatically: No. The peer 
reviewer comments from the California Air Resources Board (CARB) low 
carbon fuel standard review confirm that, at this time, ILUC 
calculations lack the requisite scientific rigor to support their 
incorporation into law. One peer reviewer underscored that the science 
and ``art'' of ILUC modeling and methodology is ``in its infancy.'' \3\ 
Another peer reviewer concluded that ILUC methodology exhibits an 
unacceptably large range of uncertainty, far exceeding the uncertainty 
associated with all of the other modeling relied upon in the Staff 
Report.\4\ A third peer reviewer concluded that ``the values used to 
quantify the carbon intensity due to land use change for ethanol from 
corn and sugarcane are not yet sufficiently developed to be 
scientifically confirmed; refinement and validation of those quantities 
is needed.'' \5\
---------------------------------------------------------------------------
    \3\ Peer review comments of J. Reilly, Review of Proposed 
Regulation to Implement the Low Carbon Fuel Standard, April 6, 2009, 
(``Reilly comments'') at 5 (``The indirect emissions issue . . . is a 
very new area where research that could establish with confidence such 
indirect emissions is in its infancy.'').
    \4\ Peer review comments of L. Marr, Scientific Review of the 
CARB's Proposal to Implement the Low Carbon Fuel Standard, Mar. 31, 
2009, at 2 (``The largest uncertainties in the estimation of carbon 
intensities are associated with the indirect effects. Relatively 
speaking the magnitude of direct effects are much more certain.'').
    \5\ Peer review comments of V. Thomas, Review of Proposed 
Regulation to Implement the Low Carbon Fuel Standard, posted to 
website, Apr. 14, 2009 at 3.
---------------------------------------------------------------------------
    BIO submitted the following recommendations to CARB at its public 
hearing on April 23, 2009, to postpone incorporation of ILUC modeling 
or calculations in final regulations:

    1. The Board should direct its staff to continue soliciting input 
from all stakeholders and from the scientific community on appropriate 
ILUC modeling and reliable data sources, without any fixed commitment 
to GTAP or the parameters used in GTAP.

    2. The Board should coordinate this further review of ILUC modeling 
with EPA's process for developing sounder science to support its 
rulemaking on the GHG emissions associated with different alternative 
fuels. Coordination with European regulatory processes studying ILUC 
should also be pursued.

    3. The Board should expect this process to take as much as 2 years, 
after which it will again publish a staff report and proposed 
regulations and transmit the report for peer review. This next time, 
peer reviews should be completed and posted for public comment before 
the public comment period on the proposed regulations begins.

    4. During the up-to 3 year period in which ILUC methodologies will 
not be finalized in California, the LCFS regulations could remain 
otherwise in effect, without any ILUC penalty for biofuels. This period 
of future scientific study and a subsequent rulemaking proceeding 
should be recognized for what it is--a transition period and not a 
permanent elimination of ILUC penalties. During this transition period, 
the Board could authorize the publication of best estimates of carbon 
intensity values for different pathways, with and without tentative 
ILUC values indicated by the current state of scientific modeling of 
ILUC.

    5. The Board should establish as its legal standard for adopting 
ILUC methodology and calculations the development of an economically 
and scientifically robust, consensus model that is capable of 
validation by meaningful real-world data that would result in tolerable 
ranges of uncertainty. Until there is much greater consensus concerning 
the modeling and calculation of ILUC, the Board should refrain from 
incorporating even best estimates of ILUC impacts in final regulations.

    6. If, using scientifically rigorous models or analysis, Staff 
determines that certain biofuel pathways will have a net ILUC benefit, 
i.e., they will sequester more carbon than they emit through land-use 
change, the Board should consider early adoption of regulations that 
lock-in these net benefits for these ``best technologies.'' The early 
recognition of these net benefits of ``best technologies'' should drive 
the evolution of the biofuels industry towards such technologies. 
Later, after the requisite period for scientific studies, the Board can 
consider adoption of final regulations that fix ILUC penalties for 
``lagging technologies.''

    7. The Board should consider adopting ILUC mitigation rules that 
will allow producers of technologies with significant ILUC penalties to 
reduce the amount of those penalties through verifiable investments in 
(i) activities that improve land use efficiency, (ii) research for 
lifecycle efficiencies, including biorefinery energy and co-product 
efficiencies and (iii) and other activities that secure direct carbon 
intensity benefits in the California or national economy.

    BIO believes that CARB's adoption of these measures will allow it 
to implement the LCFS and to secure substantial carbon intensity 
savings from the use of transportation fuels in California, without 
imposing insufficiently justified ILUC penalties only on biofuels. BIO 
believes that EPA should take a similarly measured approach.
    Investments in first generation biofuels are catalyzing efficiency 
across the entire agricultural sector. These efficiency gains have the 
potential to greatly lessen demand pressure on land, and, thus, to 
reduce GHG emissions from undesired land conversion. The proposed ILUC 
penalties for first generation corn-based ethanol threaten the industry 
with a substantial competitive disadvantage relative to all other 
fuels. Resulting reductions in investment in first generation 
technologies will, in turn, threaten recently realized agricultural 
efficiency gains, and will discourage investments in allied 
technologies--such as advanced fractionation, cold fermentation, and 
renewable repowering--that could further improve the direct GHG profile 
of biorefineries, while increasing production of food, feed and other 
co-products from the same acre of land.
    Premature regulatory implementation of ILUC methodology and 
calculations will also chill investment in second generation biofuels. 
Even though cellulosic ethanol is indicated to have a lesser ILUC 
penalty than corn-based ethanol, the penalty is still substantial. 
Moreover, adoption of immature ILUC methodology would signal to 
potential investors in the fledgling industry that penalties of 
uncertain validity are likely to be imposed on cellulosic ethanol, and 
not on other alternative fuels. We understand that Congress wants to 
take a lead role in spurring alternative transportation fuels, and, 
more generally, in reducing GHG emissions across the country and the 
world. However, by incorporating immature ILUC methodology for biofuels 
the U.S. will be out of step with regulatory efforts internationally--
where the European Parliament recently decided to postpone inclusion of 
ILUC in biofuel regulations, pending completion of an expected 2 year 
study of the complex methodology. BIO suggests to not lock in ILUC 
methodology, but to continue serious scientific studies aimed at 
improving modeling, securing reliable data, and resolving 
uncertainties. Such studies would be most usefully undertaken in 
conjunction with EPA's analyses of ILUC, which will also afford 
opportunity to share information with European and other nations 
studying the same issue.
    ILUC methodology should also be coordinated with policies being 
undertaken at all governmental levels to improve agricultural practices 
(yields, sustainability of marginal lands, GHG sequestration from 
changed practices, such as no tilling, etc.) and to reduce pressures 
for deforestation and conversion of sensitive lands in at risk 
countries. With land and forestry practices sensibly managed, increased 
biofuel production world-wide should not result in substantial net 
carbon emissions attributable to land use conversion in at risk 
countries.
    In closing, the successful development of a myriad of 
biotechnologies and their rapid deployment throughout the economy can 
advance the nation's goals of both sharply reducing greenhouse gas 
emissions and encouraging cleaner and more sustainable energy 
resources. Biofuels, using the most advanced science, can significantly 
reduce U.S. GHG emissions compared to petroleum based gasoline and new 
biotechnology developments such as improved enzymes and high-yielding 
drought-tolerant crops are rapidly improving the GHG profile of both 
traditional and advanced biofuels. BIO thanks the Committee for its 
support of advanced biofuels, and for its consideration of these 
comments.
                                 ______
                                 
          Submitted Statement of Society of American Foresters
    On behalf of the Society of American Foresters (SAF), the national 
scientific and educational organization representing the forestry 
profession in the United States with over 14,000 members, please accept 
the following testimony for the hearing record on the Renewable Fuel 
Standard (RFS) held May 6, 2009.
    As an organization chartered to advance the science, education, 
technology, and practice of forestry for the benefit of society, the 
SAF believes that woody biomass energy from our nation's forests is 
part of the solution to supplying America with reliable renewable 
energy. As the House is aware, it is distressing that at a time when 
considerable efforts are being made to address global climate change--
by preventing the conversion of forests to competing uses and by 
mitigating the likelihood of increasingly devastating wildfires--the 
definition of ``biomass'' in a Federal RFS needlessly limits the 
management options available to Federal land managers, and diminishes 
the market incentives available to private forestland owners that allow 
them to resist development pressures and maintain their land as 
forests. We commend the House Agriculture Committee's efforts to craft 
a more scientifically, socially, and ecologically appropriate 
definition, which can help balance the nation's most pressing forest 
management needs and safeguard the important environmental and societal 
values our forestlands provide.
    SAF supports strategies and policies that promote the development 
of economically and environmentally viable forest biomass energy 
production together with those that assist communities, forest owners, 
public forest managers, and local entrepreneurs in accomplishing urgent 
wildfire prevention and forest health improvement projects. This 
includes appropriately defining ``woody biomass'' in any Federal 
legislation.
    Increased utilization of forest biomass will also help combat 
global climate change and improve the nation's energy security by 
providing an abundant, renewable fuel resource as a substitute for 
imported fossil fuels. On public lands in the West, many of the 
silvicultural treatments prescribed to reduce the risk of catastrophic 
wildfire and improve forest health will generate large volumes of 
forest biomass. Increased utilization of forest biomass can improve 
forest conditions in the eastern and southern states as well, where 
additional markets for low-quality and small-diameter trees also will 
enable forest managers to improve forest health. On other forests, both 
public and private and across the country, forest health and 
restoration treatments are needed to control insects and disease and to 
improve wildlife habitat and watersheds. This type of management can be 
costly, as much of the biomass removed has little to no value. An 
appropriately structured RFS would help to create a market for woody 
biomass. This, in turn, would encourage much-needed forest health or 
fuels reduction projects by offsetting the some of the cost of biomass 
removal. The current RFS, with its restrictive, one-size-fits-all 
definition, encourages the opposite.
    Concern for the sustainability of biomass power generation has led 
to a prescriptive, process-based approach. The 2007 Energy Bill's RFS 
definition of ``renewable biomass'' is prescriptive and restrictive. 
Although this method may give some interested parties a level of 
comfort, it is a disservice to our nation's forests and has no basis in 
science. Forests are complex, diverse, and in constant flux as a result 
of natural and man-made disturbances. No two acres are alike and, as 
such, no two acres should be treated alike. Thus, such a prescriptive 
definition serves as a disincentive to restore forest health in many 
areas, because Federal requirements are too onerous and, in some cases, 
even contradict necessary silvicultural treatments.
    Alternatively, an outcome based approach, with a broader definition 
of ``renewable biomass'', would give flexibility to manage forestland 
sustainably. Ideally, on private land, this would be done with the 
assistance of a professional forester who writes a management plan or 
harvest plan that addresses soil conservation, water quality, wildlife 
habitat, and biodiversity. This approach would allow management 
decisions to be site specific and unique to the needs and goals of a 
particular forest. It also would serve as a powerful incentive for 
landowners to consult with professional foresters to promote best 
management principles, and to allow management efforts to adapt to 
changes in the landscape or as new science and management techniques 
become available (i.e., adapting climate change or other disturbances).
    In regard to public lands, the SAF believes the laws and 
regulations that preceded the 2007 Energy Bill, such as the National 
Environmental Policy Act (NEPA), National Forest Management Act (NFMA), 
and the Federal Land Policy and Management Act (FLPMA), more than 
adequately provided requirements for the sustainability of biomass 
removal. Past biomass definitions have excluded areas such as 
Wilderness, Wilderness Study Areas, and inventoried Roadless areas. 
These definitions, too, although politically popular, make little sense 
from a forestry perspective. Some of these areas, for example, are in 
need of habitat restoration, insects and disease containment, or fuels 
reduction projects, which could maintain the character of these special 
designations while simultaneously improving forest health. Land 
managers in the Forest Service and Bureau of Land Management should 
decide what projects are needed and where. The biomass from these 
projects should count toward an RFS that helps offset the cost of 
removal and stretch appropriated dollars toward the further enhancement 
of public lands.
    Our forest resources are renewable. Although some biomass may be 
removed from public or private land, it will inevitably grow back and 
likely need to be removed again. There are roughly 20 billion board 
feet of new growth and 10 billion board feet of mortality on our 
national forests every year. In contrast, there are (on average) 2 
billion board feet of removals. As we discuss the sustainability of 
biomass, which is imperative, we cannot forget that we are losing 
ground in our efforts to restore public forests. We also must remember 
that creating a viable biomass market through an RFS will help protect 
private forestlands from development and safeguard the environmental 
and economic benefits on which we all depend.
                                 ______
                                 
       Submitted Statement of National Alliance of Forest Owners
I. Introduction
    The National Alliance of Forest Owners (NAFO) is pleased to submit 
comments to the House Committee on Agriculture regarding the ``impact 
of the indirect land use and renewable biomass provisions in the 
renewable fuel standard (RFS)''. NAFO is an organization of private 
forest owners committed to promoting Federal policies that protect the 
economic and environmental values of privately-owned forests at the 
national level. NAFO membership encompasses more than 74 million acres 
of private forestland in 47 states. NAFO members are well positioned to 
help our nation meets its renewable energy objectives, and NAFO is 
prepared to work with the Committee and Congress toward that end.
    Private working forests are a fundamental part of the strategic 
natural resources infrastructure of our nation, producing renewable, 
recyclable and reusable wood and paper products, sustaining plants and 
wildlife, producing clean water and air and providing recreation 
experiences. Working forests also play a substantial role in helping 
this country achieve energy independence while reducing greenhouse gas 
(GHG) emissions. Forest biomass is a renewable energy feedstock that 
can help meet our national renewable energy goals in all regions of the 
country, if placed on a level playing field with other renewable energy 
sources.
    NAFO asks this Committee to recognize biomass from private, working 
forests as an eligible feedstock on an even playing field with other 
renewable energy sources as it reviews the Federal RFS. The RFS should 
recognize that forest owners already work within a well established 
framework of laws, regulations and non-regulatory programs and actions 
that promote and maintain responsible forest management, and will 
continue to do so as they help our nation meet its renewable energy 
objectives.
II. Working forests will help our nation meet its objectives to 
        increase our reliance on secure, domestic sources of renewable 
        energy and help reduce atmospheric greenhouse gas (GHG) 
        concentrations.
    Experts have long recognized working forests as a source of real 
and verifiable reductions in greenhouse gases and a cost-effective 
source of industrial GHG offsets. The United Nations' 2007 
Intergovernmental Panel on Climate Change (IPCC) highlights forest 
management as a primary tool to reduce GHG emissions. The IPCC states 
that, ``In the long term, a sustainable forest management strategy 
aimed at maintaining or increasing forest stocks, while producing an 
annual sustained yield of timber, fiber or energy from the forest, will 
generate the greatest mitigation benefit.'' \1\
---------------------------------------------------------------------------
    \1\ Climate Change 2007: Mitigation. Contribution of Working Group 
III to the Fourth Assessment Report of the Intergovernmental Panel on 
Climate Change [B. Metz, O.R. Davidson, P.R. Bosch, R. Dave, L.A. Meyer 
(eds.)], Cambridge University Press, Cambridge, United Kingdom and New 
York, NY, USA, page 543.
---------------------------------------------------------------------------
    However, a Federal RFS that does not appropriately include all 
forms of forest biomass not only limits our country's ability to 
produce cost-effective renewable fuels, it significantly limits the 
carbon benefits associated with using fuels derived from such biomass 
in regions of the country where forests are the dominant land use.
    Appropriately including forest biomass in an RFS would take full 
advantage of these carbon mitigation benefits in the energy context. 
Likewise, a policy that discourages forest biomass utilization will 
forfeit these benefits.
III. Definitions of eligible biomass feedstock should put working 
        forests on an even playing field with other renewable energy 
        sources.
    NAFO has particular concern about the definition of eligible forest 
biomass found in the Energy Independence and Security Act of 2007 
(EISA). Definitions of qualifying renewable energy feedstocks should 
provide a level playing field for market access across all feedstock 
sources and encompass the full range of forest biomass, including trees 
and other plants, forest residues (e.g., tops, branches, bark, etc.) 
and byproducts of manufacturing (e.g., sawdust, bark, chips, dissolved 
wood retrieved from the papermaking process, etc.). Presently there are 
at least four different definitions of qualifying forest biomass in 
Federal statute.\2\ This adds complexity and confusion to project 
developers, biomass producers and Federal program administrators who 
are required to determine how the various, and at times conflicting, 
definitions interact with one another.
---------------------------------------------------------------------------
    \2\ Separate definitions of eligible forest biomass can be found in 
Section 45(c)(3) of the Internal Revenue Code (26 U.S.C. 45(c)(3)); 
Section 203(b)(1) of the Energy Policy Act of 2005 (42 U.S.C. 
15852(b)); Section 201(1)(I) of the Energy Independence and Security 
Act of 2007 (42 U.S.C. 7545(o)(1)(I)); and Section 9001(13) of the 
Food, Conservation, and Energy Act of 2008 (7 U.S.C. 8101(12)).
---------------------------------------------------------------------------
    As currently written, the EISA RFS definition places confusing 
parameters on significant acreages of private forestlands in the form 
of land use restrictions. These restrictions limit the ability of 
forest biomass to contribute to meeting the ambitious mandate to 
produce 36 billion gallons of renewable fuels annually by 2022.
    This definition also significantly restricts the use of forest 
biomass from naturally growing and regenerating forests, which make up 
more than 90 percent of our nation's non-Federal forests. By doing so, 
it removes potential markets and viable economic options needed by 
private forest owners to support thinning for a variety of sustainable 
forest management practices, and who are already experiencing economic 
pressures from the steep declines in traditional markets such as solid 
wood and pulp and paper manufacturing.
    The definition for qualifying forest biomass in the EISA 
discourages necessary and appropriate forest management activities that 
promote forest health and sustainability. Proper forest management 
focuses on moving the forest toward its desired condition. No matter 
the desired condition, appropriate management often includes removing 
material that could be used productively. By using specific 
definitions, such as slash, planted trees, residues, and pre-commercial 
thinning to limit the material that can used productively contradicts, 
rather than promotes, sound forest management.
    Private landowners recognize that their forest's health depends on 
the health of neighboring forests. Limiting renewable biofuels from 
Federal lands limits the options of Federal land managers to manage for 
a healthy forest, which threaten private forests, and constricts the 
areas that can support a biofuels plant, especially in the West. This 
could mean large swaths of the country could not have adequate supply 
to support a plant without access to renewable biomass from Federal 
lands.
    The current definition also creates complex chain-of-custody 
requirements that could cause fuel manufacturers to exclude large 
portions of potential feedstock supply in order to meet compliance 
requirements. If identifying qualifying feedstock becomes too complex 
or costly, project developers may forego the development of facilities 
that use forest biomass altogether, thereby placing the overall RFS in 
jeopardy.
IV. NAFO is prepared to work with Congress and other stakeholders to 
        realize the contributions of working forests in energy policy 
        in an environmentally responsible way.
    NAFO is prepared to help develop a constructive approach using 
forest biomass to help meet our nation's energy needs. Notwithstanding 
the strong record of environmental benefits private forests provide, 
NAFO is prepared to work with policy makers and other stakeholders to 
ensure that forest biomass, and all other sources of renewable energy, 
help meet our renewable energy objectives in an environmentally 
responsible way.
    NAFO suggests the Committee support a Federal renewable fuel policy 
that promotes rather than discourages the use of forest biomass for 
renewable energy. Federal policy, and definitions of qualifying forest 
biomass in particular, should be broad and inclusive so as to encourage 
forest biomass utilization and foster cost-effective compliance. The 
current RFS definition is too restrictive, placing forest biomass at a 
disadvantage with respect to other feedstocks and ultimately 
discouraging its use.
    NAFO respectfully requests that Congress consider H.R. 1190 as it 
reviews the Federal RFS. H.R. 1190 amends the Federal renewable 
biofuels standard so that it is consistent with the definition codified 
in the 2008 Farm Bill. This definition establishes a level playing 
field for forest biomass and positions forest owners to make a full 
contribution toward achieving the RFS objectives. NAFO supports H.R. 
1190 and urges Congress to enact it.
V. Conclusion
    NAFO strongly supports our nation's efforts to establish new 
sources of renewable energy, and thereby reduce its dependence on 
fossil fuels and imported energy. America's working forests can play a 
fundamental role in meeting these new and growing energy needs. U.S. 
policies should encourage investment in forests as a source of 
renewable energy by establishing non-restrictive definitions of forest 
biomass eligible for use in renewable energy programs.
    The RFS should fully include forest biomass as a renewable energy 
source and ensure that the definition of biomass encompasses the full 
range of forest biomass, including: trees and other plants; forest 
residuals; and wood byproducts including sawdust, bark, wood chips, and 
dissolved wood. Such an approach will enable our country to meet its 
renewable fuel objectives. At the same it, it will allow working 
forests to make their full contribution to our nation's renewable 
energy portfolio while providing important additional environmental 
benefits, such as reduced GHG emissions, clean water, wildlife habitat 
quality recreation and other environmental benefits Americans need and 
enjoy.
    For more information, please contact:

National Alliance of Forest Owners
(202) 367-1163
[email protected]
                                 ______
                                 
Supplemental Material Submitted by Hon. Tim Holden, a Representative in 
                       Congress from Pennsylvania
                               Exhibit 1
Hon. Lisa Jackson,
Administrator,
Environmental Protection Agency,
Washington, D.C.

    Dear Administrator Jackson:

    We are writing to request an immediate extension of the comment 
period for proposed rulemaking pertaining to the Renewable Fuel 
Standard (RFS), as amended by the Energy Independence and Security Act 
(EISA, P.L. 110-40), to allow an additional 120 days for comment.
    We believe that the current 60 day comment period does not provide 
sufficient time for the public to review the 549-page Notice of 
Proposed Rulemaking and 822-page regulatory impact analysis, nor does 
it allow adequate time for people to prepare their comments. Since the 
Environmental Protection Agency (EPA) is planning to provide details 
about its lifecycle greenhouse gas analysis during meetings in June, 
the current deadline limits the ability of people to consider and 
respond to the information expected to be presented at those meetings.
    The future of our biofuels industry is too important to rush to 
judgment on such important and critical issues as what constitutes a 
renewable biomass feedstock and how to consider indirect land use 
changes. Additionally, we believe the provisions in the underlying 
statute must be modified in order to fully ensure that the regulations 
are based on sound scientific principles. If we want the biofuels 
industry to be successful and if we are serious about decreasing our 
dependence on foreign oil, the comment period must be extended while we 
all work to advance the goal of achieving a full range of renewable 
options to meet our fuel needs.
    Thank you in advance for considering this request.
            Sincerely,
            [GRAPHIC] [TIFF OMITTED] 51922.008
            
                               Exhibit 2
[GRAPHIC] [TIFF OMITTED] 51922.009

[GRAPHIC] [TIFF OMITTED] 51922.010

                               Exhibit 3
March 2, 2009

Hon. Arnold Schwarzenegger,
Governor,
Office of the Governor,
Sacramento, CA.

RE: Opposed to Selective Enforcement of Indirect Effects in CA LCFS

    Dear Governor Schwarzenegger,

    We are writing regarding the California Air Resources Board's (ARB) 
ongoing development of the Low Carbon Fuel Standard (LCFS). With the 
rulemaking nearing its final stage, we would like to offer comments on 
the critical issue of how to address the issue of indirect, market-
mediated effects.
    As you are aware, ARB staff continues to push a regulation that 
includes an indirect land use change (iLUC) penalty for biofuels. To be 
clear, this effect is not the direct land conversion from growing crops 
for fuel. It is the alleged indirect, price-induced land conversion 
effect that could occur in the world economy as a result of any 
increase in demand for agricultural production. The ability to predict 
this alleged effect depends on using an economic model to predict 
worldwide carbon effects, and the outcomes are unusually sensitive to 
the assumptions made by the researchers conducting the model runs. In 
addition, this field of science is in its nascent stage, is 
controversial in much of the scientific community, and is only being 
enforced against biofuels in the proposed LCFS.
    The push to include iLUC in the carbon score for biofuel is driven 
at least partially by concerns about global deforestation. There is no 
question that global deforestation is a problem, and that indirect 
effects must be looked at very carefully to ensure that future fuels 
dramatically reduce GHG emissions without unintended consequences. The 
scientific community is actively seeking ways to mitigate 
deforestation, enhance efficient land use, feed the poor and 
malnourished and reduce global warming. Because of the complex and 
important issues involved, it is critical that we rely on science-based 
decision-making to properly determine and evaluate the indirect effects 
of all fuels, as well as any predicted changes in agricultural and 
forestry practices. In a general sense, it is worth noting that most 
primary forest deforestation is currently occurring in places like 
Brazil, Indonesia and Russia as a direct result of logging, cattle 
ranching and subsistence farming. Adding an iLUC penalty to biofuels 
will hold the sector accountable to decision-making far outside of its 
control (i.e., for decisions related to the supply chains of other 
products), and is unlikely to have any effect on protecting forests or 
mitigating GHG emissions as a result of land management practices. But 
because indirect effects are not enforced against any other fuel in the 
proposed LCFS, an iLUC penalty will chill investment in both 
conventional and advanced biofuel production, including advanced 
biofuels made from dedicated energy feedstocks such as switchgrass and 
miscanthus, which have the potential to make the agricultural sector 
far less resource-intensive and could provide a significant carbon 
negative source of transportation fuel.
    More than 20 scientists wrote to the ARB in June 2008 suggesting 
that more time and analysis is required to truly understand the iLUC 
effect of biofuels. In addition to iLUC, we know very little about the 
indirect effects of other fuels, and therefore cannot establish a 
proper relative value for indirect effects among the various compliance 
fuels and petroleum under the LCFS. In consideration of this and other 
rulemaking activities and research conducted since June 2008, we, the 
undersigned 111 scientists, continue to believe that the enforcement of 
any indirect effect, including iLUC, is highly premature at this time, 
based on the following two principles:
(1) The Science Is Far Too Limited and Uncertain For Regulatory 
        Enforcement
    ARB staff is proposing to enforce a penalty on all biofuels for 
indirect land use change as determined by a computable general 
equilibrium (CGE) model called GTAP. This model is set to a static 
world economic condition (e.g., 2006), then shocked with a volume of 
biofuel to create the perceived land conversion result. The modeling 
outcome is applicable to the set of assumptions used for that 
particular run, but is not particularly relevant when there is a shift 
in policy, weather, world economic conditions or other economic, social 
or political variables. For example, by definition, these models assume 
zero innovation, which means they could not have predicted the 500% 
increase in corn yields since 1940, the tripling of wheat yields since 
1960, or the 700% increase in yield that can occur if farmers in 
developing countries adopt higher yield seed varieties and more 
efficient farming practices. This inability to predict innovation is 
not limited to agriculture; similar attempts to use economic 
equilibrium models in other emerging markets like telephony or 
computing would have been equally unsuccessful. As discussed, the model 
runs are unusually sensitive to the assumptions made by the modelers, 
which is why the iLUC modeling results published thus far differ by a 
factor of at least four, and under some scenarios, are actually zero 
for today's biofuels. Even at this late stage in the LCFS process, the 
GTAP model runs still do not reflect basic on-the-ground realities, 
such as the use of marginal and idle lands. They do not reflect recent 
articles about the potential for energy crops to absorb carbon at 
higher rates than previously thought. A partial solution to this 
problem is to conduct a series of model runs with different assumptions 
and adjustments. Unfortunately, this has not occurred at ARB 
(researchers have run limited sensitivity analysis within the current 
set of primary assumptions). We are only in the very early stages of 
assessing and understanding the indirect, market-mediated effects of 
different fuels. Indirect effects have never been enforced against any 
product in the world. California should not be setting a wide-reaching 
carbon regulation based on one set of assumptions with clear omissions 
relevant to the real world.
(2) Indirect Effects Are Often Misunderstood And Should Not Be Enforced 
        Selectively
    In basic terms, there is only one type of carbon impact from a 
commercial fuel: its direct effect. Direct carbon effects are those 
directly attributable to the production of the fuel, which in the case 
of biofuel includes the land converted to produce the biofuel 
feedstock. Indirect effects, on the other hand, are those that 
allegedly happen in the marketplace as a result of shifting behaviors. 
As such, penalizing a biofuel gallon for direct and indirect land use 
change is the equivalent of ascribing the carbon impact of land 
converted to produce biofuel feedstock as well as the land needed to 
produce another, allegedly displaced supply chain (e.g., soy production 
for food). Leaving aside the issue of whether these effects can be 
predicted with precision or accuracy, or whether such a penalty is 
appropriate for the LCFS, it is clear that indirect effects should not 
be enforced against only one fuel pathway. Petroleum, for example, has 
a price-induced effect on commodities, the agricultural sector and 
other markets. Electric cars will increase pressure on the grid, 
potentially increasing the demand for marginal electricity production 
from coal, natural gas or residual oil. Yet, to date, ARB is proposing 
to enforce indirect effects against biofuel production only. This 
proposal creates an asymmetry or bias in a regulation designed to 
create a level playing field. It violates the fundamental presumption 
that all fuels in a performance-based standard should be judged the 
same way (i.e., identical LCA boundaries). Enforcing different 
compliance metrics against different fuels is the equivalent of picking 
winners and losers, which is in direct conflict with the ambition of 
the LCFS.
    Proponents of iLUC inclusion claim that all regulations are 
uncertain. This is true. However, the level of uncertainty implicated 
here far outweighs that found in other regulatory fields. For example, 
the European Parliament declared in December that the iLUC of biofuel 
``is not currently expressed in a form that is immediately usable by 
economic operators.'' \1\ They decided not to incorporate iLUC 
penalties in their biofuel programs and initiated further analysis of 
the issue. It is also not enough to suggest that iLUC is a significant 
indirect effect, while other indirect effects are likely smaller. The 
magnitude of the alleged iLUC effect ranges from zero to very large, 
depending on the assumptions utilized. This is also likely true for 
other fuels, especially with regard to the marginal gallons of 
petroleum that are coming into the marketplace, such as heavy oil, 
enhanced oil recovery, and tar sands. Either way, even small effects 
are significant under the LCFS. Just a few g/MJ separate corn ethanol 
from petroleum in the proposed regulation, and advanced biofuel is very 
close to CNG and hydrogen under certain scenarios. We agree with the 
sentiment expressed by many experts that while indirect effects are 
important to understand, enforcing them prematurely and selectively on 
only certain fuels in a performance-based standard could have major 
negative consequences, even for GHG mitigation. Put another way, no 
level of certainty justifies asymmetrical enforcement of indirect 
effects.
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    Given the limited time, a reasonable solution to the challenges 
discussed above is to submit an LCFS regulation based on direct carbon 
effects (including direct land use impacts) and support a rigorous 24 
month analysis of the indirect, market-mediated effects of petroleum 
and the entire spectrum of alternative fuels, regardless of source. The 
analysis could be conducted in collaboration with other institutions 
and governments implementing carbon-based fuel standards, and should 
include a consideration of the best way to prevent carbon effects 
outside the primary system boundary, including promoting sound land use 
practice with more direct policy solutions. This approach is consistent 
with the principle that all fuels should be judged through the same 
lens in a performance-based standard, as well as the approach taken by 
the European Parliament. It is worth noting that an LCFS policy based 
on direct effects already favors non-land intensive, advanced biofuel 
production over conventional biofuel production.
    The LCFS provides an incredible opportunity to reduce the carbon 
intensity of transportation fuel and promote a more sustainable 
transportation fuel marketplace. We commend your leadership and the ARB 
staff for their ability to process a challenging set of scientific data 
resources into a workable regulation. However, it is critical that the 
LCFS stay on course with regard to its primary mission of establishing 
a level, carbon-based playing field for all fuels.
    We are writing this letter as researchers in the field of biomass 
to bioenergy conversion, but the signatories do not represent the 
official views of the home institutions, universities, companies, the 
Department of Energy, the United States Department of Agriculture, or 
any of the National Laboratories. We look forward to working with ARB 
to ensure that the regulation reflects the best science available, and 
takes a policy approach that is balanced across all fuel pathways.
            Sincerely,

Blake A. Simmons, Ph.D.,
Vice-President, Deconstruction Division,
Joint BioEnergy Institute,
Manager, Biomass Science and Conversion Technology,
Sandia National Laboratories;

Jay D. Keasling, Ph.D.,
Director,
Physical Biosciences Division,
Lawrence Berkeley National Laboratory,
Hubbard Howe Distinguished Professor of Biochemical Engineering,
Departments of Chemical Engineering and Bioengineering,
University of California, Berkeley,
Chief Executive Officer,
Joint BioEnergy Institute;

Harvey W. Blanch, Ph.D.,
Chief Science and Technology Officer,
Joint BioEnergy Institute,
Lawrence Berkeley National Laboratory
Member, National Academy of Engineering,
Merck Professor of Chemical Engineering,
University of California, Berkeley;

Robert B. Goldberg, Ph.D.,
Distinguished HHMI University Professor &
Member, National Academy of Sciences,
Department of Cell, Developmental, & Molecular Biology,
University of California, Los Angeles;

Pam Ronald, Ph.D.,
Vice-President, Feedstocks Division,
Joint BioEnergy Institute,
Department of Plant Pathology,
University of California, Davis;

Paul D. Adams, Ph.D.,
Deputy Division Director, Physical Biosciences Division,
Lawrence Berkeley National Laboratory
Adjunct Professor, Department of Bioengineering, U.C. Berkeley,
Vice President for Technology, the Joint BioEnergy Institute
Head, Berkeley Center for Structural Biology;

Bruce E. Dale, Ph.D.,
Distinguished University Professor,
Dept. of Chemical Engineering & Materials Science,
Michigan State University;

Charles E. Wyman, Ph.D.,
Ford Motor Company Chair in Environmental Engineering Center for 
Environmental Research and Technology (CE-CERT),
Professor of Chemical and Environmental Engineering Bourns College of 
Engineering,
University of California, Riverside;

Alvin J.M. Smucker, Ph.D.,
Professor of Soil Biophysics,
MSU Distinguished Faculty,
Michigan State University;

Greg Stephanopoulos, Ph.D.,
W.H. Dow Professor of Chemical Engineering and Biotechnology,
Department of Chemical Engineering,
Massachusetts Institute of Technology;

Sharon Shoemaker, Ph.D.
Director,
California Institute for Food and Agriculture Research,
University of California, Davis;

Stephen R. Kaffka, Ph.D.,
Extension Agronomist,
Department of Plant Sciences,
University of California, Davis;

Terry Hazen, Ph.D.,
Director of Microbial Communities,
Joint BioEnergy Institute,
Scientist/Department Head,
Ecology Department,
Earth Sciences Division,
Lawrence Berkeley National Laboratory;

Lonnie O. Ingram, Ph.D.,
Director, Florida Center for Renewable Chemicals and Fuels,
Dept. of Microbiology and Cell Science,
University of Florida;

George W. Huber, Ph.D.,
Armstrong Professional Development Professor,
Department of Chemical Engineering,
University of Massachusetts;

Kenneth G. Cassman, Ph.D.,
Director, Nebraska Center for Energy Science Research,
Heuermann Professor of Agronomy,
University of Nebraska, Lincoln;

Om Parkash (Dhankher), Ph.D.,
Assistant Professor,
Department of Plant, Soil and Insect Sciences,
University of Massachusetts, Amherst;

Cole Gustafson, Ph.D.,
Professor,
Department of Agribusiness and Applied Economics,
North Dakota State University;

Robert C. Brown, Ph.D.,
Anson Martson Distinguished Professor in Engineering,
Gary and Donna Hoover Chair in Mechanical Engineering Professor, 
Mechanical Engineering, Chemical and Biological Engineering, and 
Agricultural and Biosystems,
Engineering Director, Bioeconomy Institute Director, Center for 
Sustainable Environmental Technologies
Iowa State University;

John Ralph, Ph.D.,
Professor, Department of Biochemistry and Biological Systems 
Engineering,
University of Wisconsin-Madison;

Daniel G. De La Torre Ugarte, Ph.D.,
Professor, Agricultural Policy Analysis Center,
Department of Agricultural Economics,
The University of Tennessee;

Michael A. Henson, Ph.D.,
Co-Director,
Institute for Massachusetts Biofuels Research (TIMBR),
University of Massachusetts, Amherst;

Danny J. Schnell, Ph.D.,
Professor and Head,
Dept. of Biochemistry & Molecular Biology,
University of Massachusetts, Amherst;

Jeffrey L. Blanchard, Ph.D.,
Assistant Professor, Department of Microbiology,
Morrill Science Center,
University of Massachusetts, Amherst;

Y.-H. Percival Zhang, Ph.D.,
Biological Systems Engineering Department,
Virginia Tech University;

Venkatesh Balan, Ph.D.,
Assistant Professor,
Department of Chemical Engineering and Material Science,
Michigan State University;

Gemma Reguera, Ph.D.,
Assistant Professor of Microbiology and Molecular Genetics,
Michigan State University;

Wayne R. Curtis, Ph.D.,
Professor of Chemical Engineering,
Penn State University;

James C. Liao, Ph.D.,
Chancellor's Professor,
Department of Chemical and Biomolecular Engineering,
University of California, Los Angeles;

Brian G. Fox, Ph.D.,
Marvin Johnson Professor of Fermentation Biochemistry,
Department of Biochemistry,
Great Lakes Bioenergy Research Center,
University of Wisconsin;

Robert Landick, Ph.D.,
Dept. of Biochemistry,
Univ. of Wisconsin-Madison;

Prof. dr. ir. Christian V. Stevens,
Professor Chemical Modification of Renewable Resources,
Faculty of Bioscience Engineering,
Director of the Center of Renewable Resources,
Ghent University, Belgium;

Alexander J. Malkin, Ph.D.,
Scientific Capability Leader for BioNanoSciences,
Physical and Life Sciences Directorate,
Lawrence Livermore National Laboratory;

Dennis J. Miller, Ph.D.,
Department of Chemical Engineering and Materials Science,
Michigan State University;

David Keating, Ph.D.,
Great Lakes Bioenergy Research Center,
University of Wisconsin-Madison;

Susan Leschine, Ph.D.,
Professor,
University of Massachusetts, Amherst,
Qteros, Inc.;

David T. Damery, Ph.D.,
Associate Professor,
Dept. of Natural Resources Conservation,
University of Massachusetts, Amherst;

Kenneth Keegstra, Ph.D.,
University Distinguished Professor,
Department of Plant Biology,
Michigan State University;

Tobias I. Baskin, Ph.D.,
Biology Department,
University of Massachusetts;

Christopher M. Saffron, Ph.D.,
Assistant Professor,
Dept. of Biosystems and Agricultural Engineering,
Dept. of Forestry,
Michigan State University;

Emily Heaton, Ph.D.,
Asst. Prof. of Agronomy,
Iowa State University;

Kurt D. Thelen, Ph.D.,
Associate Professor,
Dept. of Crop & Soil Sciences,
Michigan State University;

Bin Yang, Ph.D.,
Associate Research Engineer,
Bourns College of Engineering,
Center for Environmental Research and Technology (CE-CERT),
University of California, Riverside;

Andrea Festuccia, Ph.D.,
Professor,
University of Rome-Italy;

Francesca del Vecchio, Ph.D.,
Professor,
Cambridge University,
St. John Biochemistry Department,
Cambridge, UK;

David Shonnard, Ph.D.,
Department of Chemical Engineering,
Michigan Technological University;

R. Mark Worden, Ph.D.,
Professor,
Dept. of Chemical Engineering and Materials Science,
Michigan State University;

Satish Joshi, Ph.D.,
Associate Professor,
Department of Agricultural Economics,
Michigan State University;

Timothy Volk, Ph.D.,
Senior Research Associate,
346 Illick Hall,
Faculty of Forest and Natural Resources Management,
SUNY-ESF;

Henrik Scheller, Ph.D.,
Director of Plant Cell Wall Biosynthesis,
Joint BioEnergy Institute,
Lawrence Berkeley National Laboratory;

Joshua L. Heazlewood, Ph.D.,
Director of Systems Biology,
Joint BioEnergy Institute,
Lawrence Berkeley National Laboratory;

Dominique Loque, Ph.D.,
Director of Cell Wall Engineering,
Joint BioEnergy Institute,
Lawrence Berkeley National Laboratory;

David A. Grantz, Ph.D.,
Director, University of California Kearney Agricultural Center,
Plant Physiologist and Extension Air Quality Specialist Department of 
Botany and Plant,
Sciences and Air Pollution Research Center University of California at 
Riverside;

Rajat Sapra, Ph.D.,
Director of Enzyme Engineering,
Joint BioEnergy Institute,
Biomass Science and Conversion Technology,
Sandia National Laboratories;

Masood Hadi, Ph.D.,
Director of High-Throughput Sample Prep,
Joint BioEnergy Institute,
Biomass Science and Conversion Technology,
Sandia National Laboratories;

Swapnil Chhabra, Ph.D.,
Director of Host Engineering,
Joint BioEnergy Institute,
Lawrence Berkeley National Laboratory;

Seema Singh, Ph.D.,
Director of Dynamic Studies of Biomass Pretreatment,
Joint BioEnergy Institute,
Biomass Science and Conversion Technology,
Sandia National Laboratories;

Bradley Holmes, Ph.D.,
Director of Biomass Pretreatment and Process Engineering,
Joint BioEnergy Institute,
Biomass Science and Conversion Technology,
Sandia National Laboratories;

Manfred Auer, Ph.D.,
Director Physical Analysis,
Joint BioEnergy Institute,
Physical Biosciences Division,
Lawrence Berkeley National Laboratory;

Phil Hugenholtz, Ph.D.,
Senior Scientist,
Joint BioEnergy Institute,
Joint Genome Institute,
Lawrence Berkeley National Laboratory;

Chris Petzold, Ph.D.,
Scientist,
Joint BioEnergy Institute,
Lawrence Berkeley National Laboratory;

Steven Singer, Ph.D.,
Scientist,
Joint BioEnergy Institute,
Lawrence Livermore National Laboratory;

Michael Thelen, Ph.D.,
Senior Scientist,
Joint BioEnergy Institute,
Lawrence Livermore National Laboratory;

David A. Grantz, Ph.D.,
Director, University of California Kearney Agricultural Center,
Plant Physiologist and Extension Air Quality Specialist Department of 
Botany and Plant Sciences and Air Pollution Research Center University 
of California at Riverside;

David Reichmuth, Ph.D.,
Scientist, Sandia National Laboratories;

Amy J. Powell, Ph.D.,
Scientist, Department of Computational Biology,
Sandia National Laboratories;

Anthe George, Ph.D.,
Post-doctoral Fellow,
Joint BioEnergy Institute,
Biomass Science and Conversion Technology,
Sandia National Laboratories;

Ozgul Persil Cetinkol,
Post-doctoral Fellow,
Joint BioEnergy Institute,
Lawrence Berkeley National Laboratory;

Supratim Datta, Ph.D.,
Post-doctoral Fellow,
Joint BioEnergy Institute,
Biomass Science and Conversion Technology,
Sandia National Laboratories;

Zhiwei Chen, Ph.D.,
Post-doctoral Fellow,
Joint BioEnergy Institute,
Biomass Science and Conversion Technology,
Sandia National Laboratories;

Joshua Park, Ph.D.,
Post-doctoral Fellow,
Joint BioEnergy Institute,
Biomass Science and Conversion Technology,
Sandia National Laboratories;

Chenlin Li, Ph.D.,
Post-doctoral Fellow,
Joint BioEnergy Institute,
Biomass Science and Conversion Technology,
Sandia National Laboratories;

Hanbin Liu, Ph.D.,
Post-doctoral Fellow,
Joint BioEnergy Institute,
Biomass Science and Conversion Technology,
Sandia National Laboratories;

Richard Hamilton, Ph.D.,
Chief Executive Officer,
Ceres, Inc.;

Richard B. Flavell, Ph.D.,
Chief Scientific Officer,
Ceres, Inc.;

Robert J. Wooley, Ph.D., P.E.,
Director, Process Engineering,
Abengoa;

Tim Eggeman, Ph.D., P.E.,
Chief Technology Officer, Founder,
ZeaChem Inc.;

Dan W. Verser, Ph.D.,
Co-Founder,
EVP R&D,
ZeaChem Inc.;

Jose Goldemberg, Ph.D.,
Professor Emeritus University of Sao Paulo,
Sao Paulo, Brazil and Former Secretary for the Environment;

Neal Gutterson, Ph.D.,
President and CEO,
Mendel Biotechnology Inc.;

James Zhang, Ph.D.,
VP of Tech Acquisition and Alliances,
Mendel Biotechnology Inc.;

Mark D. Stowers, Ph.D.,
Vice President, Research and Development,
POET;

Steen Skjold-J Our reliance on fossil fuels puts petrodollars in the hands 
        of dictators and terrorists. Based on 2007 production 
        estimates, a $5 increase in the price of crude oil will add $5 
        billion annually to the coffers of Venezuela, $7.5 billion to 
        Iran, and $18 billion to Russia. This money allows these 
        countries to act against the best interests of the United 
        States. In 2008, U.S. counter-terrorism officials declared that 
        Saudi Arabia, the world's top oil producer, remains the world's 
        leading source of money for Al Qaeda and other extremist 
        networks.

   Oil Kills Democracy. It's a simple fact that democracies 
        rarely, if ever, go to war with one another. Unfortunately, oil 
        kills democracy. There are twenty-three countries in the world 
        whose oil and gas products constitute more than 60% of their 
        total exports. None of these countries are democracies. 
        Creating a world of more democratic states in which leaders 
        cannot keep their populations at bay with petrodollars requires 
        a world in which fewer fossil fuels are consumed.

   Protecting the world's oil infrastructure costs U.S. 
        taxpayers billions. The United States is responsible for 
        patrolling the world's sea lanes and ensuring safe passage for 
        seaborne commerce, much of which is oil products. The U.S. Navy 
        is budgeting $28.1 billion for operations alone in 2009. A 
        significant portion of this outlay is to make sure oil flows 
        are not interrupted.

   The Cost of Oil Places Undue Stress on the U.S. Military. 
        Every time the price of oil increases by $10 per barrel, the 
        Department of Defense is forced to spend another $1.3 billion 
        on fuel--that's the equivalent of the Marine Corps' entire 
        annual procurement budget. Fuel efficiency also has life and 
        death consequences: seventy percent of battlefield tonnage is 
        attributed to transporting fuel. Attacks on fuel convoys in 
        both Iraq and Afghanistan have become a major cause of U.S. 
        casualties. A more fuel-efficient military would save the U.S. 
        billions of dollars and untold lives.

   Climate Change Places Undue Stress on the U.S. Military. One 
        the most drastic effects of climate change is an increase in 
        the intensity and frequency of tropical storms. Hurricane 
        Katrina proved how devastating this can be not just for our 
        civilian population, but also for our armed services. Military 
        units were needed to respond to the storm, and the cost of 
        repairing the damage to the Pascagoula Naval Station in 
        Mississippi reached several billion dollars. These are 
        resources that could have been better spent on improving 
        intelligence, hunting down terrorists, or sending critical 
        equipment to our troops in Iraq and Afghanistan.

   Climate Change Creates Political Instability and Acts as a 
        Catalyst for Failed States and Terrorism. Climate change causes 
        drought, the disappearance of drinking water, and a rise in sea 
        levels. Billions of people live near coastal plains that could 
        easily end up underwater. This would cause the mass-migration 
        of millions of people and create ungoverned spaces where 
        terrorists can flourish, just as they did in Afghanistan in the 
        1990s and just as they currently do in Somalia. Competition 
        over resources, which increases with drought and dwindling 
        water supplies, can also lead to violence. The most tragic 
        evidence of this is the conflict in Darfur, where competition 
        between herders and farmers for land sparked a genocidal 
        conflict that has claimed the lives of 400,000 people.

    Having served in uniform ourselves, there is nothing we take more 
seriously than the safety and well-being of our country. We are calling 
on the State of California to lend us a hand in keeping America safe by 
enacting a fuel regulation that is unbiased and does not enforce 
indirect carbon effects against only one type of fuel. There is no 
silver bullet to the energy and security challenges we face, but 
biofuels have a crucial role to play. We hope California will continue 
to be a national leader in energy issues and allow biofuels to play 
that role.
            Sincerely,

Robert ``Bud'' McFarlane,
National Security Advisor to President Ronald Reagan,
Lieutenant Colonel, U.S. Marine Corps, 1959-1979;

William C. Holmberg,
Chairman of the Biomass Coordinating Committee,
American Council on Renewable Energy,
Lieutenant Colonel, U.S. Marine Corps (Retired), 1951-1970;

David R. Adams,
Corporal, U.S. Marine Corps & ARNG, 1978-1988;

William Banta,
Major, U.S. Marine Corps, 1951-1961;

Merton J. Batchelder, Jr.,
Captain, U.S. Marine Corps, 1951-1959;

Rye Barcott,
Captain, U.S. Marine Corps, 2001-2006;

John L. Berman,
Captain, U.S. Air Force, 1951-1955;

Joseph E. Bles,
Major, U.S. Marine Corps & USAR (Retired), 1960-1992;

Herbert W. Bruch,
Commander, U.S. Navy (Retired), 1951-1971;

Edward A. Burkhalter, Jr.,
Vice Admiral, U.S. Navy (Retired), 1951-1986;

Vivian T. Chen,
Captain, U.S. Public Health Service (Retired), 1979-2004;

Robert C. Cherry,
Captain, U.S. Marine Corps, 1951-1956;

Robert L. Church,
Lieutenant (SG), U.S. Navy, 1972-1978;

Paul Clarke,
Lieutenant Colonel, U.S. Air Force, 1987-2007;

Charles G. Cooper,
Seaman 1st/Class, U.S. Navy, 1945-1946;

William S. Daniel,
Colonel, U.S. Marine Corps (Retired), 1945-1975;

Robert Diamond,
Lieutenant, U.S. Navy, 1999-2006;

Russell Dramstad,
SMSGT, U.S. Army (Retired), 1966-1968,
SMSGT, South Dakota National Guard (Retired), 1971-2001;

Robert F. Dunn,
Vice Admiral, U.S. Navy (Retired), 1951-1989;

Michael T. Eckhart,
Petty Officer 2nd/Class, U.S. Navy, 1965-1971;

Michael Edwards,
Captain, U.S. Marine Corps, 2001-2007;

Christopher Finan,
Captain, U.S. Air Force, 2000-2007;

Joel N. Gordus,
Captain, U.S. Air Force, 1968-1972;

William P. Gorski,
Lieutenant Colonel, U.S. Marine Corps (Retired) 1951-1971;

John J. Grace,
Colonel, U.S. Marine Corps (Retired), 1946-1978;

Peter L. Hilgartner,
Colonel, U.S. Marine Corps (Retired), 1951-1981;

William P.T. Hill,
Captain, U.S. Marine Corps, 1951-1961;

Scott Holcomb,
Captain, U.S. Army, 1998-2004;

William E. Hutchison,
Colonel, U.S. Marine Corps (Retired), 1951-1976;

Erica Jeffries,
Captain, U.S. Army, 1998-2003;

Ted Kaehker,
Commander, U.S. Navy (Retired), 1984-2006;

Leland S. Kollmorgen,
Vice Admiral, U.S. Navy (Retired), 1951-1983;

Gerald E. Kuecker,
Lieutenant Commander, U.S. Navy, 1964-1985;

Peter Lohman,
Captain, U.S. Army, 2001-2005;

William R. Maloney,
Lieutenant General, U.S. Marine Corps (Retired), 1951-1985;

William T. Marin,
Captain, U.S. Navy (Retired), 1951-1978;

Deny V. McGinn,
Vice Admiral, U.S. Navy (Retired), 1967-2002;

Michael W. McGowan,
Lieutenant, U.S. Air Force, 1991-1995;

Jason Mills,
Captain, U.S. Marine Corps, 1999-2004;

Melissa Epstein-Mills,
Captain, U.S. Marine Corps, 2002-2006;

James Morin,
Captain, U.S. Army, 1997-2007;

Donald H. Morton,
Captain, U.S. Navy (Retired), 1954-1984;

Philip Miller Pahl,
Colonel, U.S. Air Force (Retired), 1951-1977;

Charles E. Parker,
1st Lieutenant, U.S. Army Reserve, 1957-1967;

Jonathan Powers,
Captain, U.S. Army, 2000-2008;

Douglas Raymond,
Captain, U.S. Army, 1995-2000;

Brooke F. Read, Jr.,
Colonel, U.S. Marine Corps, 1951-1978;

Alex Rossmiller,
Intelligence Officer, Defense Intelligence Agency, 2004-2006;

Frederick M. Ruthling,
Captain, U.S. Air Force, 1984-1991;

Erik Saar,
Sergeant, U.S. Army, 1998-2004;

Virginia K. Saba,
Captain, U.S. Public Health Service (Retired), 1963-1985;

Donald E. Shanks,
Warrant Officer/2, U.S. Marine Corps (Retired), 1986-2007;

Maxwell E. Shauck,
Seaman 3/C, Enlisted Pilot, U.S. Navy, 1958-1962;

John R. Sheridan,
Private, U.S. Army, 1958-1960;

Terron Sims II,
Captain, U.S. Army, 2000-2005;

Drew Sloan,
Captain, U.S. Army, 2002-2007;

Richard W. Smith,
Colonel, U.S. Marine Corps (Retired), 1951-1977;

Charles White Stockel,
Colonel, U.S. Army, 1942-1972;

John S. Storm,
Commander, U.S. Navy (Retired), 1954-1976;

Milton R. Swayze,
Specialist 4, U.S. Army, 1969-1970;

Orrie D. Swayzie,
Captain, U.S. Air Force, 1965-1972;

Maura Sullivan,
Captain, U.S. Marine Corps, 2001-2006;

George R. Thomas,
Lieutenant (JG), U.S. Navy, 1959-1962;

George M. Van Sant,
Colonel, U.S. Marine Corps (Retired), 1945-1977;

Kayla Williams,
Captain, U.S. Army, 2000-2005;

Thomas R. Zajac,
Corporal, U.S. Army, 1950-1954;
                               Exhibit 5
New Fuels Alliance
October 23, 2008

Mary D. Nichols, Chairman,
California Air Resources Board,
Headquarters Building,
Sacramento, CA.

    Dear Chairman Nichols,

    We, the undersigned 30 companies and individuals, are writing to 
provide comment on the prospect of including indirect land use change 
(ILUC) in the California Low Carbon Fuel Standard (LCFS), and in 
general, to discuss the public policy implications of enforcing 
indirect effects of any kind in the regulation. This letter is 
submitted in response to comments submitted to the Air Resources Board 
(ARB) on the issue of ILUC over the past several months, including at 
the most recent public workshop held on October 16th.
    First and foremost, we recognize that promoting the production and 
use of biofuels could help achieve domestic and global sustainable 
development goals, but that there are challenges associated with 
growing the biofuels industry in an environmentally responsible way. 
While the growth of crop-based biofuels should not be allowed to 
exacerbate sensitive land degradation here or abroad, there is 
nonetheless an opportunity to promote positive land use development in 
the context of both conventional and advanced crop-based biofuels. As 
such, it is important that the LCFS be careful in its regulatory 
approach if it is to foster sustainable fuel production.
    The argument in favor of including ILUC in the LCFS is based on the 
belief that biofuels have significant indirect land use impacts, and 
ignoring them is the wrong public policy decision. The argument against 
including ILUC in the LCFS is based on the belief that the field of 
ILUC--and perhaps indirect impact modeling in general--is too uncertain 
to regulate at this time.
    The public policy decision to extend the scope of the LCFS from 
direct to indirect, market-mediated effects is a monumental one. This 
is true for land use change, or any other indirect effect. Direct 
impacts are relatively certain, verifiable and attributable to specific 
types of fuels. This is true because these effects are directly related 
to and traceable to the production, transportation and combustion of 
those fuels, including upstream land use change attributable to fuel 
production, such as the conversion of pasture to corn or other biofuel 
feedstock.
    Indirect impacts, on the other hand, are market- and policy-
mediated. They are, in essence, the ripple effects of any given market 
decision in the global economy. Indirect impacts have not been enforced 
by any regulatory agency against any product in the world. Indirect 
impacts, whether applied to biofuels or any other fuel, occur as a 
consequence of a myriad of nested, policy and socioeconomic variables. 
An article published in BioScience Magazine captures the complexity of 
indirect effects, as they relate to deforestation: ``[a]t the 
underlying level, tropical deforestation is . . . best explained by 
multiple factors and drivers acting synergistically rather than by 
single-factor causation, with more than one-third of the cases being 
driven by the full interplay of economic, institutional, technological, 
cultural and demographic variables.'' \1\ This review of land change 
science goes on to conclude that it has proven difficult to achieve a 
theory of coupled land use changes that lead to useful, predictable 
outcomes for this highly complex process. Similar approaches have led 
to strikingly different outcomes depending on location, scale and other 
complex factors, making prediction uncertain.
---------------------------------------------------------------------------
    \1\ Helmut J. Geist & Eric F. Lambin, Proximate Causes and 
Underlying Driving Forces of Tropical Deforestation, BioScience 
Magazine, Volume 52, No. 2 (Feb. 2002).
---------------------------------------------------------------------------
    It may be possible to model these impacts over time, so we should 
not abandon the idea of developing the science. But it is also true 
that no model today comes close to capturing the interplay of economic, 
institutional, technological, cultural and demographic variables 
inherent with quantifying the indirect impact of any fuel. In fact, the 
economic equilibrium models being offered as the mechanisms to quantify 
(and perhaps enforce) ILUC in the LCFS were not designed for regulatory 
use--i.e., to assign specific compliance metrics to specific fuels. 
They were designed to analyze the impacts of policies in more general 
terms. Using a model to publish a paper is very different than using a 
model to assign specific values that could fundamentally change the 
business landscape for alternative energy companies. As indicated in a 
2008 GTAP paper on biofuels, referenced by the ARB LCFS website under 
GTAP peer review: ``researchers have begun to use a CGE (computable 
general equilibrium) framework [to assess biofuels], however, with 
several caveats such as lack of incorporating policy issues, absence of 
linkages to other energy markets, and land use changes, etc. Our study 
makes an attempt to address these issues. However, the studies on CGE 
modeling are few, largely due to the infancy of the industry and 
limitations on the availability of data [emphasis added].'' \2\
---------------------------------------------------------------------------
    \2\ See https://www.gtap.agecon.purdue.edu/resources/download/
4034.pdf, p. 3.
---------------------------------------------------------------------------
    We are aware that proponents of including ILUC in the regulation 
argue that a preliminary quantification of ILUC is better than ignoring 
the impact all together; that ``zero'' is not the right number for ILUC 
for biofuels. While it is likely true that zero is not the right number 
for the indirect effects of any product in the real world, enforcing 
indirect effects in a piecemeal way could have very serious 
consequences for the LCFS. For example, zero is also not the right 
number for the indirect impact of producing a gallon of petroleum, 
using more electricity from coal and natural gas, producing advanced 
batteries and hybrid vehicles, or commercializing fuel cell technology. 
Yet, to date, ARB has not devoted any significant LCFS rulemaking 
resources to investigating the indirect effects of other fuels. If ARB 
is to enforce indirect, market-mediated effects, they must be enforced 
against all fuel pathways. The argument that zero is not the right 
number does not justify enforcing a different wrong number, or 
penalizing one fuel for one category of indirect effects while giving 
another fuel pathway a free pass.
    Proponents of ILUC inclusion insist that they know enough about 
ILUC to enforce it in a fuel regulation. For example, the June 26 UC 
letter defending ILUC inclusion states that ILUC is more certain than 
claimed because the analysis conducted to date utilizes peer-reviewed 
models like FAPRI and GTAP. However, the fact that these models are 
peer-reviewed should not be inferred to mean that they have been peer-
reviewed to be used for the purpose of enforcing indirect effects 
against specific fuels in a carbon-based fuel regulation. CGE models 
like GTAP provide estimates of land use change in distant locations, 
but at the price of severe limits in accuracy and at the expense of a 
realistic inclusion of complex causes of land use change. It seems that 
the desire for the utility of CGE models has overwhelmed the need for 
accuracy in estimating ILUC effects. The outcome could be poor public 
policy in the early stages of an unprecedented yet incredibly important 
transition in our liquid transportation fuel economy.
    The June 26 UC letter also does not acknowledge the depth of 
uncertainty of predicting market-mediated effects of any kind, or the 
status of current research into this vast scientific space. For 
example:

   The current ILUC analysis for biofuels is very limited in 
        scope. The public discussion has thus far been limited to the 
        reductive effect of corn ethanol demand on world agricultural 
        markets, and the possible conversion of relatively pristine 
        lands that could occur from agricultural expansion. In 
        addition, ARB has commented that non-corn energy crops (e.g., 
        for cellulosic ethanol) will have a similar land use ripple 
        effect if, in fact, land is used. But the analysis has not 
        investigated the possible counter-balancing effect (i.e., 
        benefits) of increased biofuel production, whether related to 
        more sustainable agricultural land use and crop shifting, 
        decreased urbanization, or the market-mediated effects of 
        additional fuel supplies. Simply by increasing the 
        profitability of agriculture, both domestically and overseas, 
        biofuel production can have many positive effects on farmers 
        and farming systems. In Californian, profitability helps 
        farmers resist the pressures to transfer irreplaceable cropland 
        to urban development, among other benefits. Given that land use 
        change comes as a result of the interplay of so many variables, 
        the exclusive focus on the reductive land use effect is of 
        great concern.

   The modeling scenarios publicized to date have severe data 
        and technical shortcomings. While it is true that the GTAP 
        model is peer-reviewed, it is also well recognized that any 
        model is only as good as the inputs used. For example, the UC 
        letter states that they are using the ``state-of-the-art'' GTAP 
        model to perform ILUC analysis for corn ethanol. The GTAP 
        results were largely similar to those released by another 
        researcher using the FAPRI model. But the UC letter fails to 
        mention that they used the same land use conversion emissions 
        data--a single set of data from the 1990s--for both exercises, 
        without any apparent additional analysis or verification. So it 
        should not be surprising that the results are largely the same. 
        Other land use emissions studies have shown a ten-fold 
        difference in land conversion emissions depending on what 
        assumptions are used. In another example, the GTAP model does 
        not include inputs for idle or CRP lands. This is a concern for 
        two obvious reasons: (1) idle lands will be the first to be 
        converted under any reasonable land conversion scenario; and, 
        (2) any model that does not include idle and CRP land will 
        produce exaggerated forest effects because the major points of 
        domestic agricultural land use expansion are disabled. Lands in 
        developing countries without clear rents (economic values in a 
        marketplace) cannot be analyzed in GTAP. This includes much 
        one-time cropland that is not accounted for or included in the 
        GTAP estimates of effects. The preliminary ILUC numbers 
        reviewed to date have been described as robust by several 
        researchers involved, but an analysis that does not include the 
        major points of domestic and international agricultural land 
        expansion is not robust. It is important to note that the 
        amount of U.S. agricultural land acreage dedicated to all 
        crops, and coarse grains in particular, has generally declined 
        during the last several decades while agricultural output has 
        increased. It is also important to note that U.S. corn acreage 
        has decreased in 2008. Historically in North America, advances 
        in crop production technology correlate to the stabilization of 
        forest use and a steady increase in forested acreage over the 
        last century. Biofuel production, if carefully developed, could 
        lead to a similar process in many third world settings, and the 
        opposite effect of that feared. These considerations put into 
        serious doubt the fundamental assumption that increased demand 
        for crop-based products necessarily increases acreage planted.

   None of the available models being utilized for ILUC 
        analysis are capable of taking into account the ``interplay of 
        economic, institutional, technological, cultural and 
        demographic variables'' inherent with land use change. For 
        example, the GTAP figures presented by ARB staff on June 30 
        were neither sensitive to U.S. Federal biofuels policy, which 
        contains land use provisions designed to discourage certain 
        types of land conversion, nor the energy or land use policies 
        in those countries where the land conversion allegedly takes 
        place in the scenarios modeled. This means that the ILUC 
        scenarios do not (and cannot) take into account variables that 
        would fundamentally change the outcome of the given modeling 
        exercise, even directionally. Among the many variables driving 
        deforestation and other forms of land use change are domestic 
        and international policy, infrastructure development (including 
        roads for oil and timber extraction), soil quality, topography, 
        droughts, floods, wars, domestic cost of labor/land/fuel or 
        timber, population and migration, urbanization and poverty. A 
        recent paper published by the National Academy of Sciences 
        (NAS) notes that, ``. . . no facet of land change research has 
        been more contested than that of cause. Empirical linkages 
        between proposed causal variables and land change have been 
        documented, but these commonly involve the more proximate 
        factors to the land-outcome end of complex explanatory 
        connections, such as immigrant, subsistence farmers and 
        deforestation or locally configured common property resource 
        regimes and land degradation. The distal factors that shape the 
        proximate ones, such as urban poverty or national policies, 
        tend to be difficult to connect empirically to land outcomes, 
        typically owing to the number and complexity of the linkages 
        involved. Attention to proximate causes elevates the potential 
        to commit errors of omission . . . .'' \3\ In trying to ascribe 
        specific, numerical (CO2 e g/MJ) land use impacts to 
        specific types of biofuels, ARB and UCB staff are in essence 
        attempting to disentangle nested variables when it is the 
        cumulative effect of these factors that cause the net outcome 
        of land use change. This may be useful for policy analysis, but 
        is far more dangerous as a methodology for assigning specific 
        indirect land use change values to specific fuels within in a 
        small fraction (CA ethanol) of one sector (motor fuels) of the 
        global economy.
---------------------------------------------------------------------------
    \3\ B.L. Turner II, Eric F. Lambin, Anette Reenberg, The emergence 
of land change science for global environmental change and 
sustainability, PNAS vol. 104, no. 52 (Dec. 26, 2007).

   The noticeable lack of indirect effects analysis for other 
        fuels, particularly oil, is of serious concern. ARB staff has 
        mentioned the possibility of an ILUC analysis for petroleum, 
        but land use is only a part of the overall indirect carbon 
        effect of oil. The indirect effects of unmitigated petroleum 
        consumption, in a world economy largely dictated by petroleum 
        and energy indicators, are vast. For example, noted 
        agricultural economist (and architect of the GTAP model) Wally 
        Tyner recently concluded that 75% of the run-up in corn prices 
        is due to increased oil prices. Advocates for ILUC inclusion 
        argue that higher corn prices cause crop shifting toward corn 
        and away from soybeans, which drives up the price of soybeans 
        and attracts Brazilian (rainforest) acres to soybean 
        production. However, the UC researchers appear more inclined to 
        ascribe the carbon effects of this theoretical causal chain to 
        biofuels rather than to oil. It remains unclear, in a space 
        characterized by many layers of interrelated effects, whether 
        ascribing this effect solely to biofuels is correct. If the 
        rising price of agricultural commodities is a concern--as the 
        catalyst for additional planting--it is now clear that oil 
        prices have a profound effect on agricultural commodity 
        markets. There are also market- and policy-mediated effects for 
        electrification from coal and natural gas, hydrogen production 
---------------------------------------------------------------------------
        from coal and natural gas, and hybrid production.

   The June 26 UC letter posits the argument that 
        underestimating ILUC for biofuels is probably worse than 
        overestimating ILUC since underestimating ILUC would create 
        incentives for the overproduction of crop-based biofuel. The 
        obvious implication is that without ILUC penalties for 
        biofuels, we may face a runaway, unfairly advantaged crop-based 
        biofuels industry with potentially serious land use impacts. 
        This position seems out of touch with the realities of the U.S. 
        transportation fuels industry. Roughly 86% of the Federal 
        subsidies handed out to energy companies between 2005 and 2009 
        will go to fossil fuel companies. A recent report out of Purdue 
        University (by an author of the GTAP model) concluded that the 
        price of oil is primarily responsible for the increased price 
        of grains, including corn. The increasing price of agricultural 
        commodities has put enormous strain on the conventional 
        biofuels industry, suspending production at dozens of plants. 
        The initial LCFS Policy Analysis published in August 2007 
        recognized that the new, low-carbon transportation fuels needed 
        in California are at a disadvantage because they ``compete on a 
        very uneven playing field: the size, organization and 
        regulation of these industries are radically different.'' It is 
        difficult to see how enforcing even conservative indirect 
        effects against biofuels, especially while not enforcing any 
        indirect impacts against other fuels (as is the current LCFS 
        trajectory), would unfairly incent crop-based biofuels. More 
        likely, it will perpetuate the status quo, and continue 
        California on a path toward (increasingly less sustainable) oil 
        dependence. It is also instructive to point out, as the LCFS 
        Policy Analysis did in August 2007, the duality of California's 
        climate policy: to encourage investment and improvement in 
        current and near-term technologies, while also stimulating 
        innovation and the development of new technologies. To this 
        end, it is imperative that the LCFS value and devalue all fuels 
        equitably, so as not to exacerbate an already uneven playing 
        field for alternative fuels.

   The fundamental assumption of the current ILUC argument--
        that using an acre of land in the U.S. for fuel will require 
        almost an acre of crop development somewhere else--produces 
        questionable results when applied to ``good'' public policy 
        initiatives. For example, under the same assumption it is 
        possible that setting aside land for the Conservation Reserve 
        Program (CRP) creates more carbon emissions, because it takes 
        agricultural acreage out of domestic food and feed production, 
        which results in agricultural cultivation of grasslands and 
        deforestation abroad. It is possible that other land protection 
        policies, including national parks and wilderness areas, also 
        fail the ``zero sum'' land use assumption because they take 
        timber and agricultural land out of traditional production. By 
        the ``zero sum'' standard, any land conservation policy in 
        California or the United States exports pollution (or creates 
        ILUC) elsewhere.

   Enforcing indirect impacts using the methodology envisioned 
        by ARB may produce questionable market behaviors. ARB has 
        discussed having a ``non zero'' land use change attribution 
        (i.e., penalty) in the LCFS for certain broad categories of 
        fuels (e.g., corn ethanol, biodiesel, cellulosic ethanol, 
        etc.). However, it is generally accepted that different regions 
        have different tolerances for increased agricultural 
        production, as well as different indicators for agricultural 
        products based on weather, supply/demand, annual plantings, 
        etc. Yet, agricultural expansion in a region that can tolerate 
        it pays the same ILUC price under the LCFS as expansion in 
        regions that cannot tolerate intensification. And both farmers, 
        irrespective of the efficiency or sustainability of their crop, 
        pay for theoretical environmental damages abroad that they have 
        no control over. The public policy proposal to penalize 
        products for decisions and trends far outside of their sector 
        and control is a major one, may not produce the desired 
        behavioral effect, and should endure a substantial public 
        review process.

   We are not sure that ARB is applying the principle of 
        indirect effects enforcement in a balanced and consistent way. 
        For example, ARB staff has made clear their inclination to 
        debit all crop-based ethanol for ILUC, irrespective of the type 
        or location of the land used for production. However, on the 
        subject of tar sand petroleum use by oil companies, ARB staff 
        has implied only that oil companies will be debited if they use 
        tar sands in California. Put another way, the penalty for 
        biofuels is automatic while the penalty for oil can be avoided 
        by redistributing its product. This creates obvious compliance 
        inequities, but also questionable climate accounting in the 
        marketplace. Oil companies will simply use lighter crude in 
        California to escape penalty under the LCFS. But this decision 
        will short supply of light crude elsewhere and increase the 
        demand for tar sands and other resource intensive crude with 
        obvious climate impacts. Requiring oil companies to account for 
        tar sands use abroad is the definition of a market-mediated 
        effect. Yet ARB seems more inclined to enforce market-mediated 
        effects against ethanol, for land use change, than indirect 
        effects against oil companies for heavy crude and tar sands.

    To be clear, the renewable fuels industry supports the ongoing 
effort to better understand the indirect effects of the energy choices 
we make. But the enforcement of indirect effects of any kind, given the 
complexity and relative infancy of the field, must be done carefully 
and in a balanced way. Some members of the UC scientific community want 
to include ILUC in the LCFS. But this is not a consensus position. In 
addition to the 27 signatories of the June 24 letter to ARB, Dr. 
Michael Wang of Argonne National Laboratory, one of the foremost 
experts in lifecycle carbon assessment (LCA) field and author of the 
GREET model being used as the framework for the LCFS, recently stated, 
``indirect land use changes are much more difficult to model than 
direct land use changes. To do so adequately, researchers must use 
general equilibrium models that take into account the supply and demand 
of agricultural commodities, land use patterns, and land availability 
(all at the global scale), among many other factors. Efforts have only 
recently begun to address both direct and indirect land use changes . . 
. [w]hile scientific assessment of land use change issues is urgently 
needed in order to design policies that prevent unintended consequences 
from biofuel production, conclusions regarding the GHG emissions 
effects of biofuels based on speculative, limited land use change 
modeling may misguide biofuel policy development.'' \4\ The signatories 
of the June 24 letter expressed similar concerns.
---------------------------------------------------------------------------
    \4\ See http://www.transportation.anl.gov/pdfs/
letter_to_science_anldoe_03_14_08.pdf.
---------------------------------------------------------------------------
    The UC letter signatories dismiss the rationale that ILUC be left 
out of the LCFS at this time based, in essence, on the assertion that 
ILUC exists. As stated, all fuels and products have indirect carbon 
impacts. Yet, zero may in fact be the right number for ``indirect 
effects'' for all fuel pathways in the first version of the LCFS from a 
public policy perspective if: (1) ARB and UC cannot enforce 
scientifically defensible numbers because of the lack of verifiable or 
reliable data or an incomplete understanding of the full spectrum of 
indirect effects across all fuel pathways; and/or, (2) there are 
serious unanswered public policy questions about the merits of 
enforcing indirect effects in a performance-based carbon regulation; 
and, (3) there is no accounting for the foregone public benefits of 
domestic and international biofuel development, or for the export of 
pollution to other locations on a strict LCFS policy with high 
penalties for domestically produced biofuels. To this latter point, it 
is worth noting in any discussion about market-mediated, indirect 
effects the potential to destabilize the advanced biofuels sector with 
overly aggressive or inequitable compliance metrics against 
conventional biofuels. It is well understood that conventional biofuels 
are a cornerstone for the development of advanced biofuels, which 
includes infrastructural, political, market acceptance and investment 
risk considerations. Enforcing additional compliance metrics against 
conventional biofuels will not accelerate the commercialization of 
advanced biofuels.
    Notwithstanding the challenges ahead, our industry is eager to be 
an early actor under the regulation and looks forward to the ongoing 
formulation of the LCFS rule. We strongly agree with the UC researchers 
that the challenge that comes with ushering in new technical, economic, 
social and environmental areas of inquiry and action is of balancing 
further study with implementation. But we do not agree that throwing 
uncertain numbers at selected fuels under the LCFS will create a 
positive outcome for either the environment or the LCFS policy itself.
    We would be happy to address questions or concerns you may have, 
and appreciate your leadership on this important endeavor.
            Sincerely,

Brooke Coleman,
Executive Director,
New Fuels Alliance;

Vinod Khosla,
Khosla Ventures;

Carlos Riva,
Chief Executive Officer,
Verenium Corporation;

Neil Koehler,
Chief Executive Officer,
Pacific Ethanol;

Colin South,
President,
Mascoma Corporation;

Necy Sumait,
Executive Vice President,
BlueFire Ethanol;

Mitch Mandich,
Chief Executive Officer,
Range Fuels, Inc.;

Mark Noetzel,
President & CEO,
Cilion, Inc.;

Bill Honnef,
Co-Founder, Senior Vice President,
VeraSun Energy;

Jef Sharp,
Executive Vice President,
SunEthanol;

Patrick R. Gruber,
Chief Executive Officer,
Gevo Incorporated;

Dr. Frances H. Arnold,
Dickinson Professor of Chemical Engineering and Biochemistry,
California Institute of Technology,
Co-Founder, Gevo, Inc.;

Ken DeCubellis,
Chief Executive Officer,
Altra Biofuels;

Randy Kramer,
Founder & President,
KL Energy;

Jeff Passmore,
Executive Vice President,
Iogen Corporation;

Steve Gatto,
Chief Executive Officer,
BioEnergy International, LLC;

John Cruikshank,
Principal,
New Planet Energy, LLC;

Michael Raab,
President,
Agrivida, Inc.;

David R. Rubenstein,
Chief Operating Officer,
California Ethanol + Power LLC;

Connie Lausten,
V.P. Regulatory and Legislative Affairs,
New Generation Biofuels;

James P. Imbler,
CEO & President,
ZeaChem, Inc.;

Larry Lenhart,
Chief Executive Officer,
Catilin Inc.;

Nathalie Hoffman,
CEO & Managing Member,
California Renewable Energies, LLC;

Jeff Stroburg,
Chief Executive Officer,
Renewable Energy Group;

David Morris,
Vice President,
Institute for Local Self Reliance (ILSR);

Dr. Bruce Dale,
Professor, Department of Chemical Engineering & Materials Science,
Michigan State University;

Jeff Plowman,
Executive Director,
Sustainable Biodiesel Alliance;

Rahul Iyer,
Chief Marketing Officer,
Primafuel, Inc.;

Richard W. Hamilton,
President & CEO,
Ceres, Inc.;

Richard Gillis,
President & Chief Executive Officer,
Energy Alternative Solutions, Inc.

cc:
Governor Arnold Schwarzenegger,

David Crane, Special Advisor for Jobs & Economic Growth, Office of 
Governor Schwarzenegger,

Linda Adams, Secretary, Cal-EPA,

A.G. Kawamura, Secretary, California Department of Food & Agriculture,

Mike Scheible, Deputy Director, Air Resources Board,

Karen Douglas, Commissioner, California Energy Commission.
                               Exhibit 6
April 15, 2009

Mary D. Nichols,
Chairwoman,
California Air Resources Board,
Headquarters Building,
1001 ``I'' Street,
Sacramento, CA.

    Dear Chairwoman Nichols,

    We, the undersigned advanced and cellulosic biofuel companies, are 
writing to provide our collective comments on the Proposed Regulation 
to Implement the Low Carbon Fuels Standard (LCFS).
    First, we commend the state of California for its exemplary vision 
and leadership in developing energy policies that aspire to reduce 
greenhouse gas emissions, decrease our reliance on fossil fuels, and 
stimulate the economy. The Initial Statement of Reasons (ISOR) says the 
LCFS is designed to ``. . . create a lasting market for clean 
transportation technology, and stimulate the production and use of 
alternative low-carbon fuels in California.'' We agree that these 
policy goals are both admirable and absolutely critical to the future 
of our nation. However, we are greatly concerned that because the draft 
regulation creates an unlevel playing field for both first- and second-
generation biofuels, these goals ultimately will not be reached.
    Because the LCFS is structured as a performance-based regulation, 
fair determination of a fuel's lifecycle carbon intensity is critically 
important. Lifecycle analysis serves as the foundation of any 
performance-based, technology neutral regulation. As such, it is 
essential that all regulated fuels are evaluated using the same 
analytical boundaries. Unfortunately, the Air Resources Board's (ARB) 
analysis uses asymmetrical boundaries to assess the carbon intensity of 
various fuels. Specifically, biofuels from any feedstock grown on land 
are penalized for a highly uncertain and unproven market-mediated 
effect known as indirect land use change, while petroleum and other 
fuel types are assumed not to cause any indirect carbon effects or 
market-mediated impacts. One important indirect petroleum effect that 
must be acknowledged is the long-term impact of not immediately 
beginning to diversify away from fossil fuels. Failure to transition 
away from fossil fuels will result in increased demand for conventional 
oil, which depletes those sources faster today and accelerates the need 
for higher greenhouse gas fossil hydrocarbons (e.g., tar sands and oil 
shale) tomorrow.
    Supporters of enforcing indirect land use effects against biofuel 
often suggest that this policy decision is necessary to help encourage 
advanced biofuel production. In fact, in a November 2008 news article, 
ARB member Dan Sperling stated, ``I really think these biofuels 
producers should appreciate that this is going to help them, especially 
those that use cellulosic or biomass feedstocks.'' \1\ We have a 
distinctly different point of view. We are concerned that the inclusion 
of indirect effects penalties for biofuels, and other inequalities in 
the LCFS, will erode investor confidence and market certainty for both 
first and second-generation biofuels. Contrary to the belief held by 
some, producers of next generation biofuels such as cellulosic ethanol 
are not supportive of selectively including indirect effects in the 
LCFS. The successful development, commercialization, and sustained 
production of second-generation biofuels is largely contingent upon 
continued market opportunities for the first generation of biofuels. 
Securing financing for second-generation biofuels projects in today's 
economy is challenging enough; but the negative signal sent to 
potential investors by the enforcement of selective and questionable 
penalties against biofuels may be insurmountable.
---------------------------------------------------------------------------
    \1\ Lamb, Celia. ``Biofuels makers object to state's proposed 
standards for cleaner fuel.'' Sacramento Business Journal. November 7, 
2008.
---------------------------------------------------------------------------
    Artificially limiting the use of first generation biofuels may 
inadvertently close the door to future renewable fuels. Over the past 
30 years, the first-generation ethanol industry has established robust 
transportation and storage infrastructure; cultivated an investment 
base and created financial networks; advocated policies that create 
market certainty; and, more generally, raised the nation's collective 
experience level related to introducing renewable fuels into a market 
dominated by fossil fuels. It is also critical to understand that some 
conventional biofuel companies are also some of the largest investors 
in cellulosic ethanol. We view the transition to second-generation 
biofuels as being evolutionary rather than revolutionary.
    Many of us were signatories of an October 2008 letter to ARB 
Chairwoman Mary Nichols from second-generation biofuels companies, 
researchers, and organizations. The letter clearly stated, ``. . .we do 
not agree that throwing uncertain numbers at selected fuels under the 
LCFS will create a positive outcome for either the environment or the 
LCFS policy itself.'' \2\ The letter further suggests, ``. . . no model 
today comes close to capturing the interplay of economic, 
institutional, technological, cultural and demographic variables 
inherent with quantifying the indirect impact of any fuel.'' Our 
position on these issues has not changed.
---------------------------------------------------------------------------
    \2\ Letter to Chairwoman Mary Nichols. http://www.arb.ca.gov/lists/
lcfs-lifecycle-ws/46-arb_luc_final.pdf.
---------------------------------------------------------------------------
    ARB's use of vastly different boundaries for different fuels is 
clearly demonstrated by the cursory assessment of the direct land 
impacts of crude oil operations. ARB examined the direct land impacts 
of only California oil fields, while ARB's boundaries for biofuels 
analysis are global in scope and include indirect carbon effects. ARB's 
analytical boundary for oil's direct land impacts might be justifiable 
if California produced all of the oil it consumes. However, more than 
60% of the oil consumed in California is imported from outside of the 
state. Further, there is no evidence that ARB conducted a comprehensive 
analysis of the indirect, market-mediated impacts of oil imported or 
produced in the state. Preliminary analysis presented by Life Cycle 
Associates to ARB in January indicated several potential sources of 
indirect and direct GHG emissions associated with oil production that 
have been overlooked in ARB's analysis and most other traditional 
lifecycle analyses. Examples of these emissions include methane from 
flaring, methane from tailing ponds, and emissions associated with some 
refinery byproducts. The report said that other fuels could--and 
should--be run through economic models and other analytics to test for 
indirect effects. This has not been done.
    Next-generation biofuels producers agree with the 111 scientists 
and academics from California and other states who recently submitted a 
letter to Governor Arnold Schwarzenegger, stating, ``Leaving aside the 
issue of whether these [indirect] effects can be predicted with 
precision or accuracy, or whether such a penalty is appropriate for the 
LCFS, it is clear that indirect effects should not be enforced against 
only one fuel pathway.'' The letter's signatories, including members of 
National Academies of Sciences and Engineering, further stated that the 
proposal ``. . . creates an asymmetry or bias in a regulation designed 
to create a level playing field. It violates the fundamental 
presumption that all fuels in a performance-based standard should be 
judged the same way.'' \3\
---------------------------------------------------------------------------
    \3\ Letter to Gov. Arnold Schwarzenegger. http://www.arb.ca.gov/
lists/lcfs-lifecycle-ws/74-phd_lcfs_final_feb_2009.pdf.
---------------------------------------------------------------------------
    We think it is important to recognize that due to the highly 
uncertain nature of indirect land use change modeling and the lack of 
consensus on methodology, European institutions recently decided to 
postpone inclusion of indirect land use change as a factor in 
determining the carbon intensity of biofuels in the European Union (EU) 
Renewable Energy and Fuels Quality Directive.\4\ Rather, the EU 
institutions directed the initiation of a 2 year study aimed at gaining 
a better understanding of the land impacts of biofuels and methods for 
minimizing land effects. We believe ARB should consider a similar 2 
year study period and coordinate fully with EU officials and U.S. 
Environmental Protection Agency to develop a methodology for analyzing 
indirect effects that is uniform, validated, and scientifically sound.
---------------------------------------------------------------------------
    \4\ See http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP/
/TEXT+TA+P6-TA-2008-0613+0+DOC+XML+V0//EN&language=EN#BKMD-27.
---------------------------------------------------------------------------
    We are also greatly concerned by the ISOR's premature presentation 
of insufficient and questionable analysis on the land use change 
impacts of cellulosic feedstocks. In the ISOR, cellulosic crop-based 
biofuels are assumed to induce indirect land use change emissions of 18 
g CO2-eq./MJ. There is very little research and virtually no 
modeling to support this initial conclusion. In fact, ARB's indirect 
land use change assessment for cellulosic biofuels relies almost 
entirely on a few pages of information from an unpublished, un-reviewed 
paper by Purdue University researchers. The Purdue authors themselves 
characterize the analysis as a ``very rough picture'' of the potential 
land impacts of cellulosic feedstocks. While ARB characterizes the 
cellulosic indirect land use change value as preliminary in nature, 
publishing the result at all will establish a view of cellulosic 
biofuels that may be significantly disconnected from reality. We also 
question ARB's selection and use of specific assumptions. For example, 
ARB assumes average cellulosic feedstock ethanol yields will be 250 
gallons/acre. Published literature and data from field trials suggest 
commercial-scale ethanol yields will be much higher.
    In closing, we strongly encourage the ARB to continue to refine and 
improve its lifecycle modeling framework. We also believe the 
methodology and ARB's results must be further peer-reviewed by a multi-
disciplinary group of disinterested economists, climate change 
scientists, soil scientists, plant biologists, and other experts. This 
has not yet been done. We strongly recommend the delay of inclusion of 
indirect effects in the LCFS regulation until more appropriate 
analytical tools are developed and rigorous peer review is conducted. 
Additionally, if ARB is truly committed to fairly enforcing market-
mediated effects on a level playing field, the Board should immediately 
initiate a comprehensive research effort that examines the indirect 
effects of all fuels.
    We sincerely appreciate the opportunity to provide comment and look 
forward to continuing to work with ARB to develop a workable policy 
that achieves the state's ambitious, but attainable, carbon reduction 
goals.
            Sincerely,

Abengoa Bioenergy,
BioEnergy International, LLC,
BlueFire Ethanol Fuels, Inc.,
California Ethanol & Power, LLC,
Ceres, Inc.,
Coskata,
Iogen Corporation,
Novozymes,
Pacific Ethanol,
Qteros, Inc.,
Verenium,
ZeaChem Inc..
                               Exhibit 7
April 21, 2009

Mary D. Nichols, Chairman,
California Air Resources Board,
Headquarters Building,
1001 ``I'' Street,
Sacramento, CA.

RE: Investor Concerns About Enforcement of Indirect Effects in the CA 
LCFS

    Dear Chairman Nichols,

    As members of the California clean energy investment community, we 
appreciate the opportunity to comment on the proposed California Low 
Carbon Fuel Standard (LCFS), and specifically, to discuss the critical 
issue of how to address concerns about indirect effects under the 
regulation.
    As a general matter, we commend your leadership and that of the 
Schwarzenegger Administration in acting to reduce the carbon intensity 
of California transportation fuels. Most importantly, we support your 
focus on a performance driven regulation that provides important 
predictability for clean fuel investors, and attempts to avoid picking 
winners and losers. As leading investors in advanced biofuels and other 
transportation solutions, we are sensitive to the need to promote the 
lowest carbon and most sustainable solutions. In reviewing the LCFS 
proposal dated March 5, 2009 we noted that the Air Resources Board 
(ARB) plans to score the different compliance fuels based on their 
direct ``cradle to grave'' carbon effects. It also appears that ARB 
plans to enforce an additional carbon penalty on biofuels for 
``indirect land use change (iLUC)'' based on newly evolved economic 
modeling. We the undersigned, have significant concerns about the 
current use of iLUC and its selective application to biofuels.
    As investors in a range of low carbon fuel technologies, we want to 
ensure that fuel options are treated equally and scored with the same 
level of accuracy, including the petroleum fuel baseline. This is 
important so that we can invest with a clear understanding of the 
performance of a particular fuel option under an LCFS. Indirect effects 
of all kinds, not just land use change, may have significant impacts on 
the footprint of each fuel option and its viability under an LCFS. Our 
primary concern is that if indirect effects are included in the 
regulation that they be studied with equal scope and effort across all 
fuels before they are applied to any fuels. The current approach, which 
selectively adds iLUC to biofuels, reduces the carbon benefits of both 
advanced and conventional biofuels, but leaves significant uncertainty 
about how the other alternatives will be treated under the regulation 
and whether the number assigned to biofuels will hold up under further 
review. This will likely have a significant chilling effect on the 
development of lower carbon fuels, including advanced biofuels.
    At a basic level, we also have increasing concerns about the 
validity of current indirect effects modeling--specifically for ``land 
use change'', which is the only effect currently modeled for the LCFS. 
According to a wide range of scientific experts in the field, many of 
whom expressed their concerns about the selective enforcement of 
indirect effects in a letter dated March 2, the underpinnings of the 
current iLUC methodology are problematic and may be proved faulty under 
closer scrutiny.
    First, we are concerned that the model itself--called GTAP--is not 
yet peer-reviewed for its new application as a predictive carbon model, 
and that GTAP has a documented history of being imprecise. ``Indirect 
land use change'' is an outcome derived by adding a predetermined 
amount of biofuel demand to a static, preset economic model, which in 
turn projects the potential ``price induced'' expansion of the 
agricultural sector onto additional land. It is a useful academic 
exercise, but as a price model it cannot account for the profit margins 
that drive real world decision making. As a result, the model is likely 
to over estimate effects that in reality would be mitigated by market 
forces, or produce estimates that in many cases are simply wrong. For 
example, in prior applications of the GTAP methodology, the model 
predicted changes in land use between 2001 and 2006 that were actually 
the opposite of the real-world changes observed over time.\1\ 
Unfortunately, ARB is currently relying on this overly simplified 
modeling methodology to assign indirect land use change penalties that 
will have very real commercial implications. It is our belief that the 
modeling methodology needs to be improved and further validated to a 
point where the level of uncertainty is more akin to other regulatory 
standards. For example, ARB's on-road emissions model (EMFAC) has been 
validated by real world carbon monoxide data based on ambient air 
monitors in tunnels. Conversely, there has been little attempt to 
validate the inputs or outputs used for the GTAP analysis. There are 
indications that some of their assumptions may be wrong. For example, 
GTAP assumes that the productivity of new land being converted is 40% 
less than existing land. However, this assumption does not square will 
actual yield and productivity data coming out of Brazil.
---------------------------------------------------------------------------
    \1\ In an earlier analysis of the impact of biofuels on U.S. land 
use patterns, researchers at Purdue using GTAP concluded the harvested 
area for coarse grains like corn would increase 8.3% from 2001 to 2006, 
U.S. harvested area for oilseeds like soybeans would decline 5.8%, and 
forested area would decline 1.5% during the same period. In actuality, 
coarse grain harvested area declined by 2%, oilseed area increased by 
0.5%, and forested area increased by 0.6% from 2001 to 2006.
---------------------------------------------------------------------------
    Second, we are concerned that the bulk of the modeling to date has 
been focused on a single fuel option--biofuel. This modeling exercise 
is being used to increase the carbon score of cellulosic ethanol by 80 
percent, and conventional biofuels by 40-200% depending on the type of 
feedstock. It appears that the oil baseline, along with all other 
alternatives including natural gas, hydrogen, and electrification are 
assumed to have no indirect effects, even though each fuel certainly 
has ``price induced'' carbon effects. For instance, if more natural gas 
is used for transportation then not only will its price rise, but it 
must be replaced in the electricity portfolio--some percentage of which 
is likely to be coal. We believe that any estimates of indirect effects 
need to be evenly applied across fuel options. Each fuel will have a 
different set of indirect carbon effects. In some cases those indirect 
effects will consist primarily of a single impact such as land use 
change, while in others it will be the sum of many small effects, but 
the science must be applied with equal diligence across all compliance 
and baseline options.
    Some groups have suggested that the current iLUC modeling would 
help advanced biofuels. This claim is not accurate. Selective indirect 
effects enforcement against biofuels makes all biofuels, including 
advanced biofuels, less competitive against the baseline and other 
alternatives. As investors we are also concerned because selective 
enforcement adds risk and uncertainty to the advanced biofuels sector 
by: (a) destabilizing the conventional biofuel sector, which continues 
to build the infrastructure and support the technological development 
that is necessary to allow advanced biofuels to reach 
commercialization; (b) institutionalizing a regulatory bias against all 
biofuels and sending mixed regulatory signals to the market, which 
amplifies market risk and will chill investment in advanced biofuels; 
(c) artificially limiting the type of feedstock available to advanced 
biofuel producers, which limits the scalability of emerging advanced 
biofuel companies. It is not enough to suggest that advanced biofuel 
companies are helped by the LCFS as long as their carbon scores are 
lower than that of petroleum. Their advantage is artificially 
diminished by selective application of indirect effects. Furthermore, 
investments are based on a much more diverse set of metrics inclusive 
of regulatory bias, politics, market barriers, science, infrastructure 
and other risk. In general, asymmetrical application of indirect effect 
penalties exacerbates investment risk in all biofuels.
    We are also aware of the argument that an LCFS without indirect 
land use change ignores a very real effect of biofuels. However, we 
feel strongly that zero is not the right number for oil or any other 
alternative either. Indirect effects come as a consequence of a myriad 
of worldwide economic, political and social variables, and should not 
be prematurely and selectively applied to a single option in a 
performance regulation. An LCFS without indirect effects (i.e., based 
on direct effects) captures the full well-to-wheels carbon emissions of 
producing and using various fuels, including the land converted for 
production of biofuel feedstock. Delaying the assignment of indirect 
effects will not lead to massive investment in higher carbon 
conventional biofuels, as some have feared. Investor time horizons are 
long enough that the risk of future penalties for iLUC will be taken 
into account.
    Our primary concern as investors is that the LCFS provides a fair 
and enduring set of standards that regulate all fuels on a level 
playing field. Selective enforcement of indirect effects creates an 
asymmetry that will have unintended consequences, and creates exactly 
the kind of regulation that makes investors wary. We believe that an 
LCFS using direct effects in conjunction with an economy wide carbon 
regulation such as AB32 has the capacity to address indirect effects as 
direct effects through clear management of unregulated imports. 
However, we support several additional strategies to address concerns 
about indirect effects: (1) a multi-disciplinary assessment of the 
indirect, market-mediated carbon effects of all fuels; (2) ongoing 
improvement of the treatment of direct land use under the GREET model; 
(3) the design and implementation of a regulatory process by which all 
fuel producers, including fossil fuel companies, customize the carbon 
impacts of their fuels, including land intensity. The apparent 
alternative--using biofuels as a pathway to stretch the traditional 
carbon assessment boundaries into indirect effects--will be 
counterproductive for the economic and environmental interests of State 
of California and will undermine investments in viable near-term 
solutions to petroleum dependence and climate change.
    We appreciate the opportunity to comment on this important 
regulation and look forward to providing any additional information you 
might need.
            Sincerely,

[alphabetical listing]

Andrew Friendly,
Principal, Advanced Technology Ventures;

Erik Straser,
Partner, Mohr Davidow Ventures;

Jason Matlof,
Partner, Battery Ventures;

Josh Green,
Partner, Mohr Davidow Ventures;

Kelsey B. Lynn,
Principal, Firelake Capital Management LLC;

Martin L. Lagod,
Managing Director, Firelake Capital Management LLC;

Maurice Gunderson,
Senior Partner, CMEA Capital;

Paul Holland,
General Partner, Foundation Capital;

Steve Golby,
Partner, Venrock;

Will Coleman,
Partner, Mohr Davidow Ventures.
                               Exhibit 8
Environmental and Energy Study Institute
March 16, 2009

Mary D. Nichols, Chairwoman,
California Air Resources Board,
Headquarters Building,
1001 ``I'' Street,
Sacramento, CA.

    Chairwoman Nichols:

    Reducing greenhouse gas emissions from transportation fuels is an 
important and urgent challenge for both California and our nation. It 
is one of the many hurdles that our nation will need to overcome if we 
are to address the climate crisis effectively and quickly. We at the 
Environmental and Energy Study Institute commend the staff of the 
California Air Resources Board for its thoughtful effort and leadership 
to establish a low carbon fuel standard--for the State of California 
and as a model for the nation.
    However, we are writing to express our concern that the excellent 
work the staff has done to assess the direct lifecycle carbon emissions 
of various fuels, based upon scientifically sound and generally 
accepted methodologies, is significantly undermined by the inclusion of 
indirect carbon emissions from land use changes attributed to biofuels 
production, about which there is very little consensus in the 
scientific community. Scientists are only just beginning to explore the 
indirect relationships (if any) between biofuels production in the U.S. 
and land use changes around the world. To base such a critical policy 
decision upon such an uncertain and unsettled body of knowledge inserts 
a significant, unfounded bias against a class of fuels which may offer, 
in the final analysis, great promise in meeting our nation's pressing 
climate and energy challenges.
    Traditional lifecycle assessments include only what have come to be 
known as `direct emissions'. Direct emissions include the carbon 
contents of the fuel itself, as well as the greenhouse gases released 
during each stage of production (from ``well to wheels''). Direct 
emissions are measurable, attributable, and described in well-tested 
models (such as the GREET model).
    ``Indirect emissions'', on the other hand, are those emissions that 
are assumed to occur somewhere in the world as a result of general 
market forces exerted by the production of a particular kind of fuel--
in this case, the greenhouse gas emissions thought to be released from 
tropical deforestation and other land use changes as an indirect, 
market-driven result of farmland in the U.S. being diverted away from 
food or feed crops to growing biofuel crops. Unlike direct emissions, 
indirect emissions cannot be observed, measured in situ or attributed 
to particular production chains.
    The CARB staff is calculating these indirect emissions using a 
general equilibrium model to estimate aggregate emissions from land use 
change at the global level due to the impact of U.S. biofuel production 
on global markets. General equilibrium models simulate changes and 
trends in commodity production by assuming a closed system that seeks 
economic `equilibrium' as determined by regional constraints of supply 
and demand. These models, however, are especially sensitive to the 
assumptions underlying the inputs and processes included in the model. 
In particular, assumptions regarding the supply of agricultural land, 
the availability of marginal lands, farmer behavior, agricultural 
production practices, economic value and use of biofuel co-products, 
and competing uses for land and natural resources, substantially affect 
model results. Determining the `right' assumptions and assigning values 
can be a highly subjective process over which scientists, policymakers, 
and stakeholders frequently disagree.
    Confounding the problem further is the difficulty of determining 
additionality. Even if one assumes that biofuel production is the 
proximate cause of a certain amount of deforestation, one cannot assume 
that those forests would have otherwise remained intact in the absence 
of biofuel production. There are many causes of deforestation and land 
use change--timber demand, livestock grazing, mining, urban sprawl, 
global food and feed demand, and subsistence activities. People 
continually seek to realize the highest value from the land. If 
biofuels are removed as a market driving factor, other factors will 
likely fill the void. In sum, using these models to calculate indirect 
emissions remains a highly subjective and speculative process, 
dependent on a number of a priori assumptions that bias the outcome.
    There is another, more fundamental issue with including indirect 
emissions in the LCFS assessment: this concerns the precedent of 
holding an industry in the U.S. responsible for activities (real or 
supposed) undertaken by people across distant borders in other 
sovereign nations. If this standard is to be applied to biofuels, in 
fairness, should it not also be applied to the assessment of fossil 
fuels, hydrogen, and electricity? On a broader level, is this a new 
standard to which other industries and public policy decisions should 
be held? The analysis of indirect effects could be applied to regulate 
against a host of other economic and social activities. All large scale 
activities that use scarce resources, affect markets, or influence 
economic or social behavior are likely to have some distant, indirect 
effects.
    Global deforestation, conversion of native grasslands and 
shrublands, and ecosystem degradation are very real problems, with 
impacts on biodiversity, water security, and the welfare of indigenous 
peoples. These land use changes have been accelerating for decades, 
driven by many factors--long before the U.S. biofuel industry came on 
the scene. The resulting greenhouse gas emissions are huge, amounting 
to over 18% of total global emissions. The international community must 
work together with urgency and speed--through international 
negotiations, treaties, and financial and technical assistance--to 
prevent further loss of forests and ecosystems across the globe.
    Including indirect emissions from land use change in the LCFS, 
however, is not likely to promote the stable climate and healthy 
ecosystems that we all seek. Instead, it will only reduce the political 
legitimacy of the LCFS as a fair and objective tool for comparing fuel 
options and unfairly penalize an industry that offers great promise for 
addressing the nation's climate and energy challenges. If the LCFS is 
to be an objective, technology-neutral assessment tool, it must treat 
all fuels equitably, using consistent, generally accepted, scientific 
criteria and methods. Otherwise, it will merely serve to reinforce the 
predispositions of the modelers.
            Sincerely,
            [GRAPHIC] [TIFF OMITTED] 51922.011
            
Carol Werner,
Executive Director, Environmental and Energy Study Institute.

cc:

Hon. Arnold Schwarzenegger, Governor of California,

David Crane, Special Advisor for Jobs and Economic Growth, Office of 
Governor Schwarzenegger,

Linda Adams, Secretary, California Department of Food & Agriculture,

Mike Scheible, Deputy Director, Air Resources Board,

Karen Douglas, Chairwoman, California Energy Commission.
                               Exhibit 9
Iowa State University of Science and Technology
April 6, 2009
Mary D. Nichols, Chairwoman,
c/o Clerk of the Board,
Air Resources Board,
Headquarters Building,
1001 I Street,
Sacramento, CA.

    Dear Ms. Nichols:

    California's proposed Low-Carbon Fuel Standard (LCFS) is one of the 
nation's first attempts to implement greenhouse gas (GHG) policy. We 
hope the policy that emerges is not merely a first attempt at 
regulation but ultimately proves to be an effective mechanism for GHG 
reduction because it will set precedent for the nation and possibly the 
rest of the world. We are concerned that as currently proposed the LCFS 
will be ineffective in reducing greenhouse gas emissions as well as 
inadvertently slowing the deployment of technologies that can reduce 
our reliance on petroleum and other fossil fuels.
    Fundamentally, the LCFS fails to address the fact that all economic 
activity generates GHG emissions. Under the proposed rules, only 
transportation fuels are held accountable for the burdens of carbon 
that are discharged into the atmosphere. Although no national inventory 
has been completed on the carbon burdens of the various goods and 
services generated by our economy, they are not difficult to estimate 
on the basis of megagrams (metric tons) of carbon dioxide equivalence 
per $1000 of gross domestic product (Mg CO2/$1,000 GDP). For 
example, steel, concrete, and corn ethanol all produce about 2 tons of 
carbon dioxide per $1,000 GDP. Beef from corn-fed cattle is 4 tons, 
gasoline from petroleum is 6 tons, and electricity from coal is almost 
10 tons. Clearly, products and services other than transportation fuels 
place significant carbon burdens on the atmosphere, which the LCFS does 
not address. Although some would argue that it is a start, we must not 
let it be a false start, slowing the ultimate goal of actually reducing 
the amount of greenhouse gases in the atmosphere. Recent proposals to 
include indirect land use change (ILUC) considerations in the 
calculation of lifecycle GHG emissions for transportation fuels is an 
attempt to correct for the shortcomings of LCFS as originally 
formulated, but it will likely prove a false start in meeting the 
challenge of global climate change.
[GRAPHIC] [TIFF OMITTED] 51922.012

    All economic activity generates greenhouse gas emissions. The Low-
Carbon Fuel Standard does not effectively address the ultimate sources 
of carbon being discharged into the atmosphere. Source: Brown and 
Gifford (Iowa State University).
    As described last year by Searchinger et al.\1\ and Fargione et 
al.,\2\ one possible outcome of a LCFS that excludes other kinds of 
economic activities in the calculation of GHG emissions is a net 
increase in GHG emissions. They developed scenarios for corn ethanol 
production that assumed the resulting corn deficit in world markets 
would be filled by farmers converting rainforests and grasslands to 
agricultural lands. Depending upon the assumptions employed for this 
land conversion, the net carbon dioxide emissions potentially could 
overwhelm the emissions saved by using biofuels in place of gasoline. 
Both groups of researchers argue that this deficit, although not 
directly the result of biofuels agriculture, should be made the 
responsibility of ethanol producers. To many, this so-called indirect 
land use change argument seems eminently reasonable in the face of 
environmental policy that only holds certain sectors of the economy 
responsible for GHG emissions.
---------------------------------------------------------------------------
    \1\ Searchinger, T., Heimlich, R., Houghton, R. A., Dong, F., 
Elobeid, A., Fabiosa, J., Tokgoz, S., Hayes, D., and Yu, T.-H. (2008) 
Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through 
Emissions from Land-Use Change, Science 319 (5867) pp. 1238-1240; 
originally published in Science Express, 7 February, DOI: 10.1126/
science.1151861.
    \2\ Fargione, J., Hill, J., Tilman, D., Polasky, S., Hawthorne, P. 
(2008) Land Clearing and the Biofuel Carbon Debt, Science 319 (5867) 
pp. 1235-1238; originally published in Science Express, 7 February, 
DOI: 10.1126/science.1152747.
---------------------------------------------------------------------------
    On the other hand, one has to question the wisdom of adopting a 
policy that so grossly distorts responsibility for net GHG emissions 
that it is unlikely to be effective in reducing them. The problem with 
using ILUC to assign responsibility for net GHG emissions is of two 
kinds. First, field research demonstrates that GHG emissions associated 
with land-use change are driven by many cultural, technological, 
biophysical, political, economic, and demographic forces rather than by 
a single crop market.\3\ Accordingly, it is virtually impossible for 
the biofuels industry to affect the course of land use change outside 
the value-chain of its own feedstock suppliers. This is made abundantly 
clear in comparing the 20 million acres of cropland that has been 
devoted to ethanol production in the U.S. over the last decade to the 
500 million acres of Brazilian rainforest that disappeared over a 
similar period of time.\4\ The inclusion of ILUC in calculating the 
LCFS will have virtually no influence on the course of land use change 
in the developing world or the associated GHG emissions. On the other 
hand, the nascent biofuels industry, if saddled with the GHG emissions 
generated by other sectors of the world's economy, will not be able to 
compete in energy markets.
---------------------------------------------------------------------------
    \3\ Kline, K.L. and Dale, V.H. (2008) Biofuels: Effects on land and 
fire; Letter to the editor, Science 321, 199.
    \4\ Glantz, M.H., Brook, A.T., Parisi, P. (1997) Rates and 
Processes of Amazon Deforestation, National Center for Atmospheric 
Research, available on the Web: http://www.ccb.ucar.edu/rates/
rateschart.html (accessed April 2, 2009).
---------------------------------------------------------------------------
    Second, a GHG policy that makes exceptions for some sectors of the 
economy and shifts the associated carbon burdens to other sectors is 
likely to encourage further growth in GHG emissions. As the Searchinger 
and Fargione studies revealed, burdening biofuels agriculture while 
exempting food agriculture could have the effect of encouraging 
unsustainable land stewardship in the developing world with the 
perverse outcome of increasing net GHG emissions around the world. All 
economic activity should be directly responsible for the GHG emissions 
emanating from them if this situation is to be avoided.
    We encourage the California Air Resources Board (CARB) to consider 
more effective mechanisms than ILUC for controlling GHG emissions 
including application of a low carbon standard to all goods and 
services in our economy, both domestically produced and imported. In 
this way we can reduce GHG emissions while encouraging development of 
biofuels technologies, which have so much potential to reduce 
dependence on imported petroleum and help mitigate global climate 
change.
            Sincerely,

Robert C. Brown,
Director, Bioeconomy Institute,
Anson Marston Distinguished Professor in Engineering,
Gary and Donna Hover Chair in Mechanical Engineering,

Hans van Leeuwen, DEng, BCEE, PE,
Professor of Environmental and Biological Engineering;

Richard M. Cruse,
Professor and Director Iowa Water Center;

John F. McClelland,
Senior Physicist and Molecular Analytics Group Leader,
IPRT/Ames Laboratory--USDOE;

Theodore J. Heindel,
Professor and Associate Chair for Academic Affairs,
Department of Mechanical Engineering;

Glenn Norton,
Center for Sustainable Environmental Technologies,
Iowa State University;

Carl J. Bern Ph.D., PE,
University Professor,
Agricultural and Biosystems Engineering Department;

Alicia Carriquiry,
Professor of Statistics;

Robert J. Angelici,
Distinguished Professor Emeritus, Chemistry;

Mark A. Edelman,
Professor of Economics and Public Policy;

Stephen H. Howell,
Director, Plant Sciences Institute,
Professor of Genetics, Development and Cell Biology;

Don Hofstrand,
Co-Director, Agricultural Marketing Resource Center;

Stuart Birrell,
Kinze Manufacturing Professor,
Associate Professor, Department of Agricultural and Biosystems 
Engineering;

John G. Verkade,
Professor of Chemistry and University Professor;

Kenneth J. Moore,
Professor of Agronomy;

David Grewell, Ph.D.,
Assistant Professor,
Agricultural and Biosystems Engineering;

Jill Euken,
Deputy Director,
Bioeconomy Institute;

John A. Miranowski,
Professor of Economics,
Director, Institute of Science and Society.
                               Exhibit 10
April 20, 2009

Mary D. Nichols, Chairman,
California Air Resources Board,
Headquarters Building,
1001 ``I'' Street,
Sacramento, CA.

RE: Call for Third Party Analysis of Indirect Land Use Change and 
Indirect Effects in Support of the CA LCFS

    Dear Chairwoman Nichols,

    We are writing regarding the California Air Resources Board pending 
rulings next week on the Low Carbon Fuel Standard (LCFS), in particular 
the premature and selective inclusion of indirect effects as a metric 
by which biofuels alone will be judged. We believe immediate action is 
necessary to avoid weakening an otherwise critical carbon-based fuel 
policy.
    The issue of how to deal with indirect effects has slowed down the 
rulemaking already, and is increasingly controversial from a scientific 
perspective. We are concerned that unresolved issues related to 
indirect effects enforcement are needlessly eroding support for an 
otherwise critical fuel policy. We are therefore requesting that CARB 
immediately enact an LCFS based on direct carbon effects while 
establishing an expeditious process to assess and account for indirect 
effects across all fuel pathways, including petroleum.
    In a letter dated March 2, 111 scientists outlined their concerns 
about the selective and premature enforcement of indirect effects in 
the proposed LCFS. We have not received a response to the letter from 
ARB, and have not observed any discernable shift in the approach taken 
by staff. As discussed, while there is general consensus around the 
need for an LCFS, and the decision to enforce direct ``cradle to 
grave'' carbon effects against all fuels, the inclusion of indirect 
land use change and indirect effects for biofuels alone are felt to be 
premature and erroneous based on the following two major factors:

    A. The science around indirect effects is not mature and/or robust 
        enough to be included in something as significant as the LCFS. 
        In addition, the GTAP model used to determine indirect effects 
        has not been validated with any significant amount of field 
        data and/or compared with other available models that are not 
        commodity-based.

    B. Indirect effects should not be selectively leveraged against any 
        fuel type, including biofuels. All fuels have direct and 
        indirect effects that should be considered as part of the LCFS. 
        The notion that the GTAP model has been used and that fossil 
        fuels have no significant indirect effects is unacceptable 
        without validation and acceptance within the peer-reviewed 
        literature. This result produced by the GTAP model reinforces 
        the need for a thorough and robust comparative study of 
        different models and different methodologies of all fuel types 
        that must be completed before they are added as a component 
        under the LCFS.

    Although this letter has sparked significant national interest and 
highlighted the lack of any consensus around indirect effects, thus 
reinforcing the conclusion that further study is absolutely essential 
before inclusion within the LCFS, our concerns have not been addressed 
by CARB and no data has emerged to suggest that CARB's numbers for 
indirect land use change are well grounded. We are therefore requesting 
that CARB Board take the following actions:

    A. Submit an LCFS regulation based on direct carbon effects, 
        including direct land use impacts.

    B. Commission the National Academy of Sciences to conduct an 18 
        month study on indirect effects of all transportation fuel 
        candidates to develop and validate a robust science-based tool 
        that can be used within the LCFS. CARB staff should continue to 
        lead a corollary effort during this time.

    The LCFS provides an incredible opportunity to reduce the carbon 
intensity of transportation fuel and promote a more sustainable 
transportation fuel marketplace. We commend your leadership and the 
CARB staff for their efforts in developing a workable LCFS regulation. 
However, it is critical that the LCFS stay on course with regard to its 
primary mission of establishing a level, carbon-based playing field for 
all fuels.
    We are writing this letter as researchers in the field of biomass 
to bioenergy conversion, but the signatories do not represent the 
official views of the home institutions, universities, companies, the 
Department of Energy, the United States Department of Agriculture, or 
any of the National Laboratories. We look forward to working with ARB 
to ensure that the regulation reflects the best science available, and 
takes a policy approach that is balanced across all fuel pathways.
            Sincerely,

Blake A. Simmons, Ph.D.,
Vice-President, Deconstruction Division,
Joint BioEnergy Institute,
Manager, Biomass Science and Conversion Technology,
Sandia National Laboratories;

Harvey W. Blanch, Ph.D.,
Chief Science and Technology Officer,
Joint BioEnergy Institute,
Lawrence Berkeley National Laboratory,
Member, National Academy of Engineering,
Merck Professor of Chemical Engineering,
University of California, Berkeley;

Bruce E. Dale, Ph.D.,
Distinguished University Professor,
Dept. of Chemical Engineering & Materials Science,
Michigan State University.

cc:

Hon. Arnold Schwarzenegger, Governor of California,

David Crane, Special Advisor for Jobs & Economic Growth, Office of 
Governor Schwarzenegger,

Linda Adams, Secretary, Cal-EPA,

A.G. Kawamura, Secretary, California Department of Food & Agriculture,

Mike Scheible, Deputy Director, Air Resources Board,

Karen Douglas, Commissioner, California Energy Commission.
                               Exhibit 11
Comment Log Display
Below Is The Comment You Selected To Display.
Comment 51 For Low Carbon Fuel Standard (LCFS09)--45 Day.
First Name: Chris
Last Name: Hagerbaumer
E-mail Address: [email protected]
Affiliation: Oregon Environmental Council

Subject: comments on LCFS proposed regulation
Comment:

    The Oregon Environmental Council (OEC) greatly appreciates CARB's 
hard work developing regulations to establish a Low-Carbon Fuel 
Standard. The LCFS is an innovative and important approach to tackling 
global warming, and we are strongly supportive of it.
    Lest you wonder why an out-of-state organization is interested in 
CARB regulations, you should know that the Oregon Department of 
Environmental Quality will hopefully be given the authority by the 
Oregon Legislature this session to undertake rulemaking to establish a 
LCFS in Oregon.
    For many years, OEC has worked to support the development and 
application of a variety of technologies and strategies to reduce 
greenhouse gas emissions from the transportation sector, including the 
production of regional, sustainably produced, low-carbon biofuels.
    OEC is advocating for a LCFS in Oregon that will harmonize with 
California's, and we want to make sure that LCFS implementation is 
accurate and fair.
    The beauty of a LCFS is that it is performance-based, allowing 
affected companies to meet the standard through a variety of means and 
avoiding premature conclusions about the ``right'' technology. 
Encouraging development of the right technologies hinges upon an even 
playing field. We are worried that CARB is creating an uneven playing 
field by choosing to account for the potential indirect carbon effects 
of biofuels, while not accounting for the potential indirect carbon 
effects of other fuels.
    Indeed, other fuels have indirect carbon effects: for example, the 
use of natural gas as a vehicle fuel means less natural gas will be 
available for stationary energy needs, potentially leading to the 
development of more coal-fired power plants. Likewise, the use of 
electricity for our transportation needs may increase demand on 
electricity and push us to dirtier fuels like coal.
    Likewise, oil companies are turning to the most polluting, most 
carbon-intensive means of producing oil--they are disturbing vast 
tracts of land and harming ecosystems while extracting oil from tar 
sands. What is the indirect effect of relying on a resource that has 
peaked? What is the indirect effect of increasing petroleum prices on 
food prices and the resulting increase of food prices on land use 
change?
    In your draft regulation, you indicate that you believe other fuels 
do not have indirect carbon effects. In order for us to be comfortable 
with that statement, we need to see your analysis. The potential 
indirect carbon impacts of fuels besides biofuels need to be modeled by 
CARB, as well.
    We believe it is prudent to follow the example of the EU and the 
recommendations of the 111 scientists who wrote to you on this subject 
who have called for an initial LCFS based on direct emissions while we 
take the time necessary to thoroughly assess indirect effects for all 
fuels.
    An even playing field is crucial to responsible implementation of a 
LCFS.
    Thank you very much for your consideration.

Attachment:
Original File Name:
Date and Time Comment Was Submitted: 2009-04-08 16:19:42
                               Exhibit 12
[GRAPHIC] [TIFF OMITTED] 51922.013

[GRAPHIC] [TIFF OMITTED] 51922.014

                               Exhibit 13
CALSTART
April 15, 2009

Mary Nichols, Chair,
California Air Resources Board,
Headquarters Building,
1001 I Street,
Sacramento, CA.

RE: Comments on Proposed Low Carbon Fuel Standard Regulation

    Dear Chairman Nichols,

    CALSTART strongly supports the adoption of a Low Carbon Fuel 
Standard (LCFS) as a discrete early action measure in California's 
fight against climate change. Though it is somewhat more complicated, 
the general concept of the LCFS is similar to the Alternative Fuels 
Portfolio Standard recommended by CALSTART and the California Secure 
Transportation Energy Partnership (CalSTEP) in its January 2007 Action 
Plan. We applaud the Air Resources Board (ARB) for their work to date 
in developing this important, first-of-its-kind policy to reduce 
greenhouse gas emissions from transportation fuels. Since 2002 and the 
adoption of the Pavley program, the ARB has been working to reduce 
tailpipe emissions. An equal or greater amount of technology forcing 
regulation should now be applied to the fuel sector. The successful and 
timely implementation of California's LCFS is a necessary component of 
the broader fight against climate change. The schedule has already been 
delayed and, given what we now know about rising greenhouse gas 
concentrations in the atmosphere, further delay would not be prudent.
    ARB staff has done a commendable job on the initial analysis and 
regulatory design, particularly with regard to the detailed 
calculations of direct emissions associated with the various fuel 
pathways. We offer the following comments and recommendations to 
strengthen the LCFS and improve its ability to both reduce emissions in 
California and serve as a model for a national program. We are 
providing comments on the following critical issues:

   Implementation and emissions timeline: recent warnings from 
        scientific experts make clear the fact that we cannot afford to 
        delay emissions reductions. We urge ARB to move forward with 
        LCFS implementation without delay and to consider how best to 
        encourage near term emissions reductions under the LCFS.

   Indirect emissions: the science in this area is new and 
        evolving, and the current regulation only examines one type of 
        indirect effects--land use changes, primarily from biofuel 
        production. Ideally, we would like to see the inclusion of all 
        indirect emissions from all fuels, once the science has evolved 
        and there is greater consensus about the secondary impacts of 
        all fuels. This was the approach chosen by the European 
        Commission.

   Process for proposing new or modified pathways: ARB should 
        provide a thoughtful yet efficient and affordable method for 
        stakeholders to propose new or modified inputs for both direct 
        and indirect emissions. Such a process would improve the 
        accuracy of the carbon intensity values while providing an 
        incentive for regulated parties to reduce the direct and 
        indirect emissions associated with their specific fuel 
        pathways. This is particularly important if ARB moves forward 
        with a regulation that includes indirect land use change 
        emissions as currently outlined in the proposed regulation.

   Models, inputs, and assumptions: the LCFS is heavily 
        dependent on complex models with many inputs and assumptions. 
        While indirect land use change is the most controversial area, 
        there are additional factors that have not been thoroughly 
        verified. We recommend that ARB continue working to refine and 
        improve upon the underlying pathway analysis at the heart of 
        the LCFS through an ongoing public process. The goal should be 
        to make sure the latest, best science is employed and to 
        validate the models and results as data become available.

    CALSTART believes that a successful LCFS based on sound and 
scientifically defensible analysis can serve as a model for a similar 
policy at the national level. It is therefore very important that we 
``get this right'' in California.

    Encourage Early Reductions and Avoid Delays

    Recent research suggests that policymakers should strive to 
encourage increased near term emissions reductions. It now appears that 
the Intergovernmental Panel on Climate Change may have underestimated 
the impacts of climate change.\1\ Furthermore, there is increasing 
evidence that suggests that the climate change effects of greenhouse 
gas emissions will be largely irreversible \2\ and potentially abrupt. 
In light of these warnings from the scientific community, there is a 
clear need to accelerate emissions reductions through intelligent 
policy choices and timely implementation of climate regulations and 
programs such as the LCFS.
---------------------------------------------------------------------------
    \1\ ``Projections of Climate Change go from Bad to Worse.'' 
Science, March 20, 2009. http://rael.berkeley.edu/files/IARU-Coverage-
Science-March24-2009.pdf.
    \2\ ``New Study Shows Climate Change Largely Irreversible.'' NOAA 
press release, January 26, 2009. http://www.noaanews.noaa.gov/
stories2009/20090126_climate.html.

    The LCFS and Complementary Policies Should Encourage Early 
---------------------------------------------------------------------------
Reductions

    As currently written, the LCFS has a backloaded compliance schedule 
and a relatively modest end goal. We understand the various constraints 
that led to this result, but believe that it highlights the need for 
complementary policies to drive early reductions.
    Furthermore, though CALSTART has not done extensive analysis on the 
subject of accounting for emissions over time, we agree with ARB staff 
on the need to continue evaluating the Fuel Warming Potential (FWP) 
method. This method shows promise because it has a scientific basis and 
takes into account the fact that emissions today are more damaging than 
emissions tomorrow. However, we understand and agree with ARB's 
decision to use the simple Annualized method in the early years, as 
indirect land use emissions debate has not been settled and the FWP 
method has not yet been adequately peer reviewed. After ARB validates 
the models and addresses the ongoing concerns over indirect emissions, 
we would recommend further consideration of the FWP method for time 
accounting.

    The LCFS Should be Implemented without Delay

    We commend ARB staff for the large volume of work they have 
completed to date on fuel pathway analysis and regulatory design. The 
LCFS is a complex and labor-intensive policy and ARB has done an 
admirable job of avoiding major delays. As we continue to move through 
the implementation process, it is important to keep up the momentum, to 
the extent that the analysis is sufficiently rigorous for regulatory 
purposes. As mentioned above, we believe the direct emissions analysis 
is relatively sound and can form the basis of a regulatory program in 
the early years. Whether or not ARB decides to include indirect 
emissions at the outset of the program, we stress the need to move 
forward with some version of the LCFS on schedule. If ARB elects to 
delay the inclusion of indirect effects to allow for additional study 
and validation of model findings, we believe the study should move 
forward quickly and the indirect effects should be incorporated as soon 
as possible.

    Study and Account for Indirect Emissions from All Fuels in a 
Consistent Manner

    The issue of indirect emissions in general and emissions from 
indirect land use change in particular has probably been the most 
controversial aspect of this process to date. The science in this area 
is new and evolving, but it is clear that indirect emissions deserve 
further consideration and should not be ignored. CALSTART commends ARB 
staff for attempting to address this difficult issue in assigning 
carbon intensity values to fuels for the LCFS. In the words of MIT 
Professor John Reilly, one of the peer reviewers for the LCFS, ``this 
is a very new area where research that could establish with confidence 
such indirect emissions is in its infancy. Ideally one would like to 
have had the scientific community investigate these issues and to have 
published competing estimates, resolving among them better or worse 
approaches and identifying uncertainties.'' \3\ Given the timeframe and 
the available data, ARB has had to move forward without this luxury. 
While the work done around indirect effects for the LCFS has clearly 
advanced the science in this area, there is more to be done.
---------------------------------------------------------------------------
    \3\ ``Review of Proposed Regulation to Implement the Low Carbon 
Fuel Standard.'' Peer review of John Reilly, Senior Lecturer, Sloan 
School of Management, MIT. http://www.arb.ca.gov/fuels/lcfs/peerreview/
041409lcfs_reilly.pdf.

---------------------------------------------------------------------------
    The Science Regarding Indirect Emissions is Still Uncertain

    The scientific arguments on both sides of this issue are well-known 
and we will not rehash them here. It is important to note, however, 
that there is a general lack of consensus and that the resistance to 
staff's approach on this issue is coming from the scientific community 
as well as from many elements of the biofuels industry.\4\ Even some of 
those who strongly support the inclusion of indirect land use emissions 
from biofuels production admit that there may still be some uncertainty 
over the magnitude of the effect.
---------------------------------------------------------------------------
    \4\ For example, 111 Ph.D. researchers recently wrote a letter to 
Governor Schwarzenegger stating their opposition to selective 
enforcement of indirect effects in the LCFS, and noting that ``the 
science is far too limited and uncertain for regulatory enforcement.'' 
http://www.arb.ca.gov/lists/lcfs-generalws/28-phd_lcfs_mar09.pdf.
---------------------------------------------------------------------------
    ARB Staff's Initial Statement of Reasons (ISOR) indicates that the 
staff is confident about the direction of the effect. However, the ISOR 
underlines the uncertainty surrounding the actual quantitative 
estimates of indirect land use change emissions, stating that ``the 
tools for estimating land use change are few and relatively new'' \5\ 
and that ``although one may argue that there is no scientific consensus 
as to the precise magnitude of land use change emissions and that the 
methodologies to estimate these emissions are still being developed, 
scientists generally agree that the impact is real and significant.'' 
\6\ CALSTART is not disputing the claim that these effects are real. 
However, we are concerned that the actual methods, models, and 
resulting effect magnitudes may not yet be sufficient for regulatory 
purposes. We are particularly concerned with the ability of the GTAP 
model to accurately predict the effect of domestic biofuel production 
on foreign land management practices and international agribusiness 
investment decisions.
---------------------------------------------------------------------------
    \5\ LCFS ISOR, X-5.
    \6\ LCFS ISOR, IV-48.

    ALL Indirect Emissions Should be Included once the Numbers are 
---------------------------------------------------------------------------
Better Understood and Independently Evaluated

    The LCFS should create a level playing field that allows fuels to 
compete with each other on the basis of lifecycle emissions. As 
proposed, however, the LCFS includes indirect land use change emissions 
from biofuels but does not include any other indirect effects. The ISOR 
notes that ``staff has identified no other significant effects that 
result in large GHG emissions that would substantially affect the LCFS 
framework for reducing the carbon intensity of transportation fuels.'' 
\7\ However, given the small differences in relative carbon intensities 
between the various fuels and the uncertainty as to the magnitude of 
indirect land use change emissions, CALSTART is concerned that the 
inclusion of indirect effects on a selective basis could undermine the 
integrity of the LCFS. If ARB staff has reason to believe that indirect 
emissions from other fuels such as conventional gasoline and diesel are 
negligible or nonexistent, we would encourage staff to make this 
analysis publicly available.
---------------------------------------------------------------------------
    \7\ LCFS ISOR, ES-29.
---------------------------------------------------------------------------
    CALSTART believes that the LCFS should ultimately include all 
emissions (direct and indirect) from all fuels, particularly if sound 
analytics can be adopted for accurately estimating the secondary 
impacts. We are concerned that selective enforcement of indirect 
effects may create the appearance of a bias that could potentially hurt 
the chances of broader adoption of the California model. We believe 
that the lack of readily available models and estimates for indirect 
emissions from other fuels is an argument for additional study, within 
a strictly time limited period, rather than an argument for assuming a 
value of zero. We commend ARB staff for stating that they ``will 
continue to work with interested parties to identify and measure [other 
indirect] effects,'' \8\ and believe that a thorough and rigorous 
independent analysis is the best way to address these issues. Whether 
or not indirect effects are included at the outset of the regulation, 
we recommend moving forward with a comprehensive and independent 
analysis of indirect effects as soon as possible.
---------------------------------------------------------------------------
    \8\ LCFS ISOR, ES-29.
---------------------------------------------------------------------------
    CALSTART has not done extensive analysis of the direct and indirect 
emissions from conventional fuels and we do not have hard data to 
present. However, if ARB is going to look beyond direct emissions and 
make assumptions about how economic activity in the USA will drive 
economic behavior in other countries, there are a number of greenhouse 
gas impacts associated with the carbon intensive incumbent fuels that 
deserve attention. Below are some examples:

   Oil exploration: it is our understanding that direct 
        emissions from oil exploration are not included in the carbon 
        intensity calculations for petroleum-based fuels.

   Military protection of oil supplies: many economists have 
        attempted to quantify the costs of protecting oil supplies in 
        the Persian Gulf. One estimate from researchers at UC Davis' 
        Institute for Transportation Studies put the annual economic 
        costs of military operations tied to defense of oil supplies at 
        $26.7-$73.3 billion, with $5.8-$25.4 billion of this tied 
        directly to the cost of defending the use of motor oil by U.S. 
        vehicles.\9\ The emissions from these large scale military 
        operations would be difficult to quantify, but that does not 
        mean they should be ignored.\10\ Even more controversial and 
        difficult, but no less real, are the carbon emissions 
        associated with global conflict over energy. Clearly there was 
        a carbon impact when the Iraqi Army blew up the wells in Kuwait 
        during the first Gulf War and fires raged for weeks thereafter. 
        When such conflicts occur, will the emissions be factored into 
        the respective inventories and models?
---------------------------------------------------------------------------
    \9\ ``U.S. Military Expenditures to Protect the Use of Persian-Gulf 
Oil for Motor Vehicles.'' Mark Delucchi and James Murphy, April 1996, 
revised March 2008. http://www.its.ucdavis.edu/publications/2004/UCD-
ITS-RR-96-03(15)_rev3.pdf.
    \10\ Former U.C. Berkeley Professor Alex Farrell, who was deeply 
involved in the lifecycle calculations underlying the LCFS, agreed in a 
private conversation with John Boesel in February 2008 that ``such 
emissions probably should be included'' in the LCFS.

   Indirect, ``spill-over'' emissions from petroleum: changes 
        in the price of oil are likely to have far-reaching impacts on 
        a variety of markets and actors worldwide. Emissions resulting 
        from this would be difficult to quantify because of the degree 
        to which oil touches all aspects of our economy, but this does 
---------------------------------------------------------------------------
        not mean these effects are not real.

    These are just a few examples of the types of effects that we think 
should be examined. There certainly may be others.

    Additional Work is Needed to Get this Right

    CALSTART recommends that ARB commission a rigorous and 
comprehensive study of indirect emissions from all petroleum-based and 
alternative fuels through an independent and well respected body such 
as the National Academy of Sciences. To avoid the pitfall of paralysis 
by analysis, we recommend that such a committee be given a defined 
period of 12-24 months to report back. The Energy Independence and 
Security Act of 2007 highlighted the need for additional work in this 
field as it relates to biofuels, and indirect emissions from other 
fuels are even more uncertain.\11\ If the study could be completed 
quickly, ARB could implement the LCFS in two phases, beginning with 
direct effects only and including the indirect effects after the 
completion of the study. While we think this phased approach has 
merits, we understand that this delay could be problematic and that ARB 
is likely to move forward with a regulation that includes indirect land 
use change. Even if this is the case, we believe it is important to 
proceed immediately with an independent review of indirect effects for 
all fuels, with the goal of updating and refining the carbon intensity 
values as the science evolves. Regardless of the approach taken, we 
don't recommend the ARB delay any further in implementing the program. 
It is time to move forward.
---------------------------------------------------------------------------
    \11\ EISA 2007 directs the Secretaries of Agriculture and Energy to 
carry out a Biomass Research and Development Initiative focused on, 
among other things, ``the improvement and development of analytical 
tools to facilitate the analysis of lifecycle energy and greenhouse gas 
emissions, including emissions related to direct and indirect land use 
changes, attributable to all potential biofuel feedstocks and 
production processes.'' EISA, Title II, Subtitle B, Sec. 232(b)(3). 
http://frwebgate.access.gpo.gov/cgi-bin/
getdoc.cgi?dbname=110_cong_bills&docid=f:h6enr.txt.pdf.
---------------------------------------------------------------------------
    We are aware of the fact that some may view our position and 
recommendations on indirect emissions as a delay tactic designed to 
support the ethanol industry in the early years of the LCFS. CALSTART 
is a fuel- and technology-neutral organization with no particular 
interest in supporting the ethanol industry at the expense of the 
environment or other alternative fuels. Rather, we believe this study 
would improve the analysis underlying the LCFS, address legitimate 
stakeholder concerns, and increase the chances of a broader adoption of 
the California model.

    Create a Thorough and Efficient Process for Proposing New or 
Modified Pathways

    CALSTART commends ARB staff for including in the regulation 
processes for modifying model inputs to reflect specific processes 
(Method 2A) and for creating new fuel pathways (Method 2B). CALSTART 
believes it is imperative that these processes apply to indirect 
emissions as well as direct emissions. The language in the ISOR refers 
only to new or modified inputs for direct emissions, but ARB staff 
mentioned in the March 27th LCFS workshop that they saw the need to 
``provide a path forward'' on the indirect emissions side as well. 
Staff indicated that they would create a process for stakeholders to 
get credit (in the form of a reduced carbon intensity value) for 
demonstrated reductions in indirect emissions, perhaps through an 
expanded Method 2B.
    Such a process is vitally important to the success of the LCFS, 
especially in light of the fact that ARB is likely to move forward with 
a regulation that includes controversial estimates of emissions from 
indirect land use change. This process would both improve the accuracy 
of the carbon intensity values and provide an incentive for regulated 
parties to reduce the direct and indirect emissions associated with 
their specific fuel pathways. From a practical standpoint, the process 
will be much more effective if it is quick, efficient, and transparent. 
If ARB is able to incorporate such a process in to the regulation, this 
should help to address some of the concerns of biofuel producers and 
should also improve the overall public perception of the regulation.

    Continually Work to Improve and Validate Models, Inputs, and 
Assumptions through a Transparent Public Process

    The LCFS is dependent on complex models with many inputs and 
assumptions. Given the nature of the regulation and the available data 
and models, the LCFS represents a departure from past ARB regulations. 
Other ARB models and programs had some scientific uncertainty, but this 
program stands out due to the modeling constraints and assumptions, the 
scarcity of data for some of the key inputs, and the relative lack of 
real world validation of model results.
    The most obvious area of potential disagreement is indirect land 
use change. The LCFS relies on relatively new science and models that 
are intended to predict the outcomes of international economics and 
human behavior. Given the lack of consensus and the changes in ARB's 
indirect emissions estimates over the past several months, we expect to 
see ongoing work in this area. For example, Professor Valerie Thomas 
noted in her official peer review of the LCFS, ``that observed data 
have not been used to validate the GTAP model findings is a significant 
weakness. The changes in corn production resulting from the Federal 
renewable fuel standard, and the change in Brazilian sugar production 
resulting from increased ethanol production should be measurable, and 
should be measured to validate the model assumptions. The ARB model 
should be adjusted to reflect data.'' \12\
---------------------------------------------------------------------------
    \12\ ``Review of Proposed Regulation to Implement the Low Carbon 
Fuel Standard.'' Peer review of Valerie Thomas, Associate Professor, 
School of Industrial and Systems Engineering, Georgia Institute of 
Technology. http://www.arb.ca.gov/fuels/lcfs/peerreview/
041409lcfs_thomas.pdf.
---------------------------------------------------------------------------
    While ARB's estimates of emissions associated with indirect land 
use change have generated the most debate, CALSTART notes that there 
are other areas of uncertainty that deserve additional attention. One 
factor that can easily tip the balance between various fuels is the 
Energy Economy Ratio (EER). Like indirect land use, this area has 
generated disagreement and a wide range of estimates. ARB staff admits 
that ``the data are relatively limited'' for establishing EER values 
for advanced and emerging vehicle technologies.\13\ Professor Linsey 
Marr outlines many important issues related to EER calculations and 
assumptions in her peer review of the LCFS.\14\ The co-product credit 
is another factor that deserves additional scrutiny.
---------------------------------------------------------------------------
    \13\ LCFS ISOR, ES-18.
    \14\ ``Scientific Review of the California Air Resources Board's 
Proposal to Implement the Low Carbon Fuel Standard.'' Linsey Marr, 
Professor of Civil and Environmental Engineering, Virginia Tech http://
www.arb.ca.gov/fuels/lcfs/peerreview/041409lcfs_marr.pdf.
---------------------------------------------------------------------------
    Given the degree to which the success of the LCFS relies on 
accurate models and inputs, we urge ARB to put into place a thorough 
and rigorous process for refining and improving the underlying 
analysis. This process should be transparent and open to public 
participation. Ongoing dialogue and stakeholder input should help to 
improve the underlying analysis as well as the public perception of the 
LCFS program.
    CALSTART thanks the ARB for the opportunity to provide input 
throughout this rulemaking process.
            Sincerely,
            [GRAPHIC] [TIFF OMITTED] 51922.015
            
John Boesel, President and CEO
                               Exhibit 14
University of California, Davis
College of Agricultural and Environmental Sciences,
Agriculutral Experiment Station
Cooperative Extension
April 22, 2009

Mary D. Nichols,
Chairperson, California Air Resources Board,
Headquarters Building,
1001 I Street,
Sacramento, CA.

    Dear Chairperson Nichols:

    The California Air Resources Board (CARB) is poised to adopt a Low 
Carbon fuel Standard (LCFS) at its up-coming meeting on April 23, 2009. 
Through the LCFS, CARB seeks to lower the carbon intensity of 
transportation fuels by 10% by 2020 by blending alternative fuels 
derived from biomass with petroleum-based fuels. I fully support this 
objective. As you realize, this seemingly modest objective masks a 
difficult, complex task, never before attempted by any state or 
national government. While difficulty is not an excuse for inaction, 
complexity requires prudence in choosing what to do in difficult 
situations. If the CARB adopts the LCFS, including the currently 
proposed method of calculating GHG values derived from indirect Land 
Use Changes (iLUC), it will make a serious regulatory mistake. The 
current iLUC policy is a regulatory bias that cannot be justified. It 
will inhibit the development of valuable alternative fuel sources, 
handicap the development of green energy businesses in California, and 
increase the costs of alternative fuels. In my view, it is based on 
some important misunderstandings about the nature of modern farming 
systems and about how biofuel businesses could best develop and evolve 
over time. It significantly overestimates the reliability and 
usefulness of the modeling method chosen to predict green house gas 
(GHG) costs associated with agricultural biofuels, particularly those 
associated with land use change in remote locations.

    If CARB adopts the LCFS as proposed, as a remedy it should also at 
a minimum agree to support a rigorous search for alternative methods of 
estimating ILUC, provide for frequent external review and assessment of 
these methods, and create a process for estimation of ILUC GHG costs 
based on a comparison of approaches. Land change science, the direct 
evaluation of land change processes and effects where they actually 
occur, offers an alternative to the method of indirect inference now 
used as the sole means to assess indirect sources. The use of 
comparative methods is a more justifiable basis for assigning something 
as complex and hard to define as an indirect GHG value. While it will 
be difficult, difficulty is not an excuse for inaction. The European 
community, faced with same uncertainty, has prudently opted for the 
development of additional assessment methods. This would be wise for 
California as well. The LCFS will have implications beyond affecting 
the carbon intensity of transportation fuels. Since the consequences 
will be large and many will be unpredictable, and since there is 
serious scientific agreement about the best means to go about 
regulation, the CARB should do whatever is possible to achieve the most 
rational standard possible.
    There are several issues that I wish to address and have staff 
consider. These are based on comments that I made at the CARB board 
meeting on March 26, 2009, at the invitation of the CARB staff.

    1. Crop based biofuels do not always compete directly with food 
        uses. It is not a question of food (or feed) vs fuels, but a 
        question of how to create more sustainable agro-ecosystems 
        (more diverse, more profitable). In many cases, crops grown for 
        biomass may facilitate that process, not only in California 
        also in many locations in the developing world were human need 
        is great.

    2. The distinction between first generation biofuels and second 
        generation biofuels referred to in the regulation and 
        justifying documents is partially arbitrary and misleading. If 
        the entire crop plant were used (corn, sugarbeets), then energy 
        yields could be similar to or even greater compared to so-
        called 2nd generation crops like switchgrass. An integrated 
        bio-refinery may change the production of energy to a by-
        product or waste management process rather than the primary 
        activity from the use of purpose grown crops. In many cases, 
        the use of some high quality crop resources may facilitate the 
        use of a larger amount of low quality ones. These developments 
        will need time to evolve from current crop-based models. This 
        evolution should be encouraged by regulation, not stifled 
        prematurely.

    3. California should encourage indigenous biofuel production to do 
        its share to reduce GHG without exporting all the consequences 
        of doing so to other locations. This is partly a matter of 
        ethics, but the state will also have the best estimates of GHG 
        effects for local systems.

    4. The key to a successful transition to a low carbon future will 
        be entrepreneurial innovation. The state should err on the side 
        of encouraging such innovation. The effects of regulation on 
        the energy sector are so fundamental, far-reaching and complex, 
        that prudence and time are needed to achieve the greatest net 
        environmental and social benefits possible.

    5. The decision to impose an iLUC handicap on agricultural biofuels 
        was premature and occurred without sufficient understanding of 
        the nature of agricultural systems. This decision violates the 
        principle of a performance standard by excluding potentially 
        viable biofuel sources and methods. iLUC should be estimated 
        using several methods, with a preference for direct estimation. 
        Reliance on a single method is unwise because no model is 
        currently able to deal with this complex issue adequately. 
        Additional time is needed to create comparative iLUC 
        approaches. In the interim, CARB should rely only on the best 
        direct GHG estimates.

    6. California, the United States, and European Union should agree 
        on the use of several policy approaches to avoid undesirable 
        LUC changes, including direct intervention to protect high 
        value ecological areas in developing parts of the world, while 
        allowing for the fulfillment of needed human development. This 
        important goal cannot be achieved in a single regulation like 
        the LCFS and may be inhibited by it. The difficulty of this 
        effort should not inhibit attempting it.

    Before concluding, I wish to comment in greater detail on the use 
of models to infer a market-induced effect on land use change in Latin 
America and elsewhere--the idea that if we cut down rainforests to 
replace crops used for biofuels, more harm to the atmosphere is done 
than good. This concern is the basis for the bias against agricultural 
biofuels built into the proposed LCFS. There is considerable 
disagreement among scientists about how best to quantify and account 
for the indirect affects of land use practices. Staff at the CARB, and 
some scientists testifying to the CARB, have asserted that the best 
science available has been adopted by CARB to set its standard. 
Actually, it would be more accurate to say that the most convenient 
science available has been adopted. CARB has decided to use a 
computable global equilibrium model called GTAP for this purpose. GTAP 
is widely and justly admired, and is a significant intellectual 
achievement. It predicts the effects of changes in the supply of 
agricultural commodities on market prices and sales around the world, 
among other outputs. It accounts for global market adjustments in 
multiple economic sectors. For the purposes for which it was created, 
it is very useful. CARB, however, is using it to infer changes in land 
use in remote regions, especially primary forest clearing in the 
tropics. Doing so allows the agency to create a green house gas cost 
associated with this clearing and assign that cost to a biofuel 
produced in Iowa, for example. Ironically, the cost of indirect land 
use change for crop based biofuels is itself estimated indirectly. 
Importantly, land use change is not discovered by using the model. 
Rather, land use change is assumed to occur in the model, so choosing 
this model necessarily results in a land use change prediction. This is 
a troubling way to implement an important policy like the LCFS because 
it gives the appearance of and in fact creates an automatic bias 
against one class of biofuels, contrary to the principle of a truly 
performance-based standard.
    Alternatively, newly developing land change science points instead 
to many other factors that have been in place for decades or longer, 
and which are far more influential locally. GTAP was not created to 
estimate ILUC in remote locations where markets and property rights do 
not function and where the loss of existing vegetation will not have 
significant consequences. So what might be justly deemed the best 
science for one purpose, is inadequate, inappropriate and far from best 
when used inappropriately for another. An indirect estimate of indirect 
land use change may result from the operation of an elegant model, but 
it fails the test of predicting actual behavior in real landscapes.
    This disagreement may seem merely like an argument among modelers. 
Why is it important enough to cause a delay the adoption or 
modification of a part of the LCFS? The reason is that the consequences 
of these new policies affecting the regulation of carbon are large. The 
LCFS, and other carbon regulations like AB 32 now in force in 
California are not simply carbon regulations. They will affect all 
aspects of our lives and make many things that we have come to value 
more costly and more difficult. They will have profound long-term 
economic and social consequences which cannot be accurately predicted. 
With such radical changes in store, we should not be in a rush. A 
prudent approach to policy would be incremental, characterized by an 
appropriate sense of humility. In times of great change and uncertainty 
like the present, it is more reasonable to be suspicious about the 
reliance on a single model for creating policy. Where serious 
scientific disagreement exists, as it does here, more time should be 
taken. Before institutionalizing bias against agricultural biofuels, 
additional ways of estimating indirect land use changes associated with 
agricultural biofuels and associated carbon accounting should be 
developed and compared. It is possible that the estimates of the carbon 
costs of biofuels using differing methods may prove to be even greater 
than the one proposed by CARB currently. But the state will have a 
level of certainty and justification more appropriate to the level of 
consequences stemming form the regulation.
    Prudence suggests that when creativity and innovation will be 
needed to overcome unprecedented challenges like eliminating the use of 
oil, the regulatory process should err on the side of encouraging 
innovation. This is exactly the opposite of what will occur if the LCFS 
is adopted as currently proposed. In the end, policy makers have to 
decide, as the CARB staff and those that support its decisions have had 
to decide. But at a fundamental level these decisions are not based on 
science, but on the preferences of scientists and regulators for 
certain ways of regulating. The sciences involved cannot be used to 
analyze or justify their own presuppositions or the proper limits for 
their use in policy making. An algorithm cannot tell us which values 
are most important.
    I have spent my lifetime working on food production on several 
different scales, using several different approaches, from organic 
gardening to family-scale dairying to commercial crop production in 
California, with some international agricultural experience to add 
leaven. The concerns raised here are not mine alone, however, but are 
shared by many agricultural scientists, engineers, international 
development specialists and biologists interested in the best ways 
forward to a future with reduced dependence on petroleum. These have 
been expressed in letters and comments to CARB, so far without 
noticeable effect. I do not work for a petroleum company or the 
biofuels industry. But I do care about a prosperous future for the 
people of California and a sustainable environment. My own biases are 
towards developing more crop alternatives for farmers in California 
with the hope of improving the agro-ecological performance of farms and 
their profitability. The right agricultural biofuels may do both in the 
appropriate locations, supported by prudent policies. Trying to 
determine how to achieve these goals and the effort needed to do so 
should not be forestalled by hasty policy making. The European 
community, faced with same uncertainty, has opted for the additional 
development of assessment methods. This would be wise for California as 
well.
    While I am critical of some aspects of the proposed LCFS 
regulation, I appreciate the extraordinary efforts and good faith of 
CARB staff as they worked to create a uniquely challenging regulation. 
I have enjoyed working with them both professionally and personally.
            Sincerely,

Stephen R. Kaffka,
Department of Plant Sciences,
University of California, Davis, and
Director of the California Biomass Collaborative.
[email protected]
530-752-8108
                               Exhibit 15
University of California
Agriculture & Natural Resources
Cooperative Extension  Sutter/Yuba Counties
April 21, 2009

Mary D. Nichols, Chairwoman,
c/o Clerk of the Board
Air Resources Board,
1001 I Street,
Sacramento, CA.

    Dear Ms. Nichols,

    I have been asked to review the animal nutrition discussion in the 
appended report to the Proposed Regulation to Implement the Low Carbon 
Fuel Standard (Vol. II) by the California EPA Air Resource Board. I 
have a Masters degree in Animal Nutrition from UC Davis Animal Science 
Department. I also have been employed by the University of California 
Cooperative Extension since 1982 working with the California livestock 
industry conducting applied research and educational programs. This 
experience gives me extensive practical knowledge of livestock diet 
formulation and management.
    In the strict nature of the University, my comments are unbiased 
toward the outcome of the findings. My only desire is to make sure that 
the best science is used in the estimation or modeling that directs 
public policy decisions.
    The document was difficult to review, due to poor referencing and a 
lack logical page numbering to the over 300 pages of information. The 
reader is given a reference to Appendix C with no direct page number to 
find the start of that section. Much time is loss searching the 
document to find the appropriate information to make a coherent 
comment. Of the references given for Appendix C that were animal 
nutrition related, fifty-eight percent had an incomplete citation to 
allow the reviewer to find and review the document. Both of these 
document deficits could indicate that staff had a limited amount of 
time to properly develop the document.
    Animal nutrition expertise is greatly lacking in the discussion on 
pages C-51 to C-54. The performance of an animal can greatly differ 
based on the optimization of the ration of feeds provided and the 
animal's nutritional requirements. There is a great amount of 
University information on DDGS available. Most nutritionists use the 
National Research Council publications on Nutrient Requirements of Beef 
Cattle, Dairy, and Swine as the guide for nutritional composition of 
feeds. Single stomached animals (swine and rats) have very different 
digestive capabilities from ruminate animals (cattle and sheep). In 
most cattle operations, DDGS serves as a protein source and competes 
with soybean meal, canola meal, and cottonseed for diet utilization. 
The amount of use in diets will be determined by price. Like all by-
product feeds, there is a limit to the amount that can be included in 
the diet.
    On page C-52 it is stated that the nutrient concentrations in DDGS 
vary considerably. This is normal for by-product feeds and all 
livestock nutritionist and managers can address that in ration 
formulation. In almond hulls, the nutritional composition will depend 
on the fan adjustment that sorts hulls from shell and twigs that have 
much lower digestibility. Nutritional testing and ration construction 
using variable products is a normal operation in the industry. This 
also is applicable to the browning reaction concern stated. The feed is 
tested in a laboratory and the price and amount in the ration are 
adjusted to economically meet the performance needs of the animal. The 
document presents feeding as a static process, when it is very dynamic 
with varying animal nutritional needs and ability to adjust the diet to 
optimize the animal performance based on research and applied feed 
knowledge.
    On page C-53 it is stated that ``less protein in DDGS is available 
to the animal''. Ruminate protein utilization is divided into two 
areas; rumen and bypass. The combination of both these provides the 
total protein utilization. The quote addresses the rumen protein 
utilization, but does not recognize the importance of bypass protein. 
This is an important aspect that needs to be acknowledged.
    The concerns about lysine, sulfur and phosphorus in DDGS diets 
raised in the document again indicate the lack of animal nutrition 
knowledge represented in this section of the document. Ration 
formulation is again a process of analyzing of the feed's composition 
and optimizing the ration of different feed sources and supplements to 
meet animal requirements for different performance (growth, lactation 
and pregnancy). All of these concerns can be addressed in the ration 
formulation.
    Transportation and handling of DDGS has occurred in California. I 
have observed large and small operations using the product and all have 
adapted systems to utilize the product without problems. Feed 
utilization is based on price for energy and protein content. If 
livestock producers find a lower priced product, they quickly invest in 
proper storage and feeding infrastructure. With 1.6 million dairy cows 
in California, at the right price and location of plants in the dairy 
production areas, transportation and utilization of WDGS would not be a 
problem.
    On page C-54 the document demonstrates a lack of knowledge of the 
livestock feeding industry and the educational institutions that work 
with them. Producers are keenly aware of how to feed the product and 
both the California State Universities (Fresno, Chico and Cal Poly) and 
University of California have active applied research and education 
programs for growers on any issues if it should arise in using DDGS.
    It is not made clear what ``traditional feeds'' are in the document 
in the first paragraph on page C-52 or how the LCFS model of DDGS 
utilization is developed. I have reviewed publication by Wang et al. 
(2008), and find it provides sound animal nutrition data to the 
analysis. It is a superior review and analysis of the DDDS utilization 
to the discussion in this document. This is an area that the staff 
clearly needs to educate themselves on to be able to competently make 
any conclusions that direct important policies of the State of 
California.
    I disagree with the staff recommendations on DDGS. Livestock 
producers will use all the DDGS if it is produced and priced correctly. 
In California, it could displace canola meal in most rations, which is 
being shipped in from Canada for approximately $70/ton for 
transportation. This would greatly reduce the carbon footprint if the 
DDGS was produced in California.
    I suggest that it would be prudent for the deliberation of this 
policy be extended. I invite the staff to engage the UC Davis Animal 
Science Department in the discussion of the correct method to use to 
evaluate DDGS ration utilization.
            Sincerely,

Glenn Nader,
UC Livestock and Natural Resources Advisor.
                               Exhibit 16
Comment Log Display
Below Is The Comment You Selected To Display.
Comment 209 For Low Carbon Fuel Standard (LCFS09)--45 Day.
First Name: Virginia
Last Name: Dale
E-mail Address: [email protected]
Affiliation:

Subject: Great uncertainty surrounds Indirect Land-Use Change (ILUC) 
estimates; therefore ILUC fact
Comment:

April 22, 2009

California Air Resources Board
Headquarters Building
Sacramento, CA 95812

REF: Great uncertainty surrounds Indirect Land-Use Change (ILUC) 
estimates; therefore ILUC factors should be excluded until better data 
and documentation are available and scientifically peer-reviewed

    Dear Board Members:

    I am writing to recommend that CARB reconsider the proposal to 
include indirect carbon emissions from land-use change (or Indirect 
Land-Use Change--ILUC--factors) in the Low Carbon Fuel Standard (LCFS) 
rule. A delay in adopting the ILUC component of the proposal for GHG 
emission calculation is warranted because current ILUC emission factors 
are theoretical estimates rather than science-based calculations.
    The ILUC implications of the LCFS are largely based on a global 
equilibrium model that is not capable of assessing impacts on indirect 
land use. Instead, natural resource extraction activities may very well 
be among the most significant factors contributing to the accelerated 
loss of natural habitat in the remaining forest zones of our planet. 
Based on my field work in the Brazilian Amazon, Panama, Guatemala and 
personal research in south and southeast Asia as well of review of 
numerous scientific studies, it seems that land-use change in 
developing countries is a combination of cultural, environmental, 
social, economic, political, and technological factors. Global market 
conditions often have a quite limited influence. In contrast to the 
model predictions, numerous studies suggest that improved prices and 
expanded market options for products, as expected under biofuel 
policies, reduce pressures for deforestation and provide tools and 
incentives to promote more sustainable land use.
    The ILUC estimates carry significant uncertainty because they are 
based on: (a) a model that was never validated or calibrated for the 
purpose of estimating land-use change; (b) input data for land use with 
degrees of uncertainty much larger in magnitude than the changes 
modeled, casting considerable doubt on the validity of results; (c) one 
set of modeling results when the same model produced wide-ranging 
results for indirect land-use change in response to minor adjustments 
in assumptions and inputs (and there is ongoing debate surrounding the 
accuracy and validity of many of those assumptions, factors and inputs) 
as documented in the papers published on the GTAP website and for CARB 
in the past 24 months; and (d) a hypothesis for indirect land-use 
change that does not meet the ``rules of reason'' tests established in 
U.S. courts for indirect environmental impacts, exposing the LCFS rule 
to potentially serious implementation obstacles that could be avoided 
if the ILUC component were postponed until better data and analytical 
tools are developed.
    Examination of the land use and economic models show that there is 
not currently any accepted approach for calculating indirect land-use 
change impacts from U.S. biofuel production and policy. GTAP has not 
been calibrated or validated for making land-use change estimates. The 
GTAP modeling assumptions used to estimate ILUC do not come close to 
reflecting the conditions and forces that prevail in the areas where 
impacts are estimated to occur. Baseline land-cover and land-use data 
and other underlying assumptions for the modeling carry huge 
uncertainties, yet these uncertain inputs determine the results. The 
sensitivity of results is illustrated in part by the wide range of ILUC 
results reported among the GTAP reports issued on this topic in 2008 
and 2009.
    Several U.S. Court decisions have considered if and when indirect 
environmental impacts need to be incorporated under proposed government 
projects. The decisions can be assembled under ``rules of reason'' that 
help determine when indirect impacts should be incorporated. The basic 
question is, ``Are the impacts (indirect land use change effects, in 
this case) reasonably certain to occur as a result of proposed action, 
or is the estimate (of ILUC) based on speculation?'' There is a lack of 
consensus on this issue in the scientific community. But, several 
considerations from past court cases may help answer the ``rule of 
reason'' question:

    (a) Are estimated ILUC impacts speculative within the context of 
        all the other events, circumstances and contingencies that 
        exist to enable the effect (e.g., deforestation)?

    (b) Is the impact (loss of natural habitat/deforestation) 
        inevitable, independent of the proposed action and the 
        theorized indirect impacts?

    (c) Does the ``precautionary principle'' clearly favor one proposed 
        action over another? (e.g., What are the impacts on land-use 
        change and deforestation if less biofuels are accepted under 
        LCFS due to the assumed ILUC factors?)

    (d) Is the estimated impact increasingly tenuous as inquiry extends 
        outward from the core project area?

    (e) If there is a ``reasonably foreseeable'' indirect impact, does 
        it occur in a remote locale that is not under direct U.S. 
        control?

    (f) What is the ``legally relevant cause'' of the impact? (Is the 
        ILUC impact isolated from the proposed action?)

    Thus it cannot be concluded that the estimated indirect impacts are 
caused by the proposed action. In the case of the California LCFS, 
rather than include ILUC factors at this time as proposed, we recommend 
that a more prudent approach would be to identify these as possible 
indirect impacts and recommend mitigations to limit the likelihood of 
negative effects. Such mitigations could include adherence to 
sustainable production standards that are developed and monitored by 
third parties.
    I applaud your pioneering efforts to establish a LCFS and support 
your initiatives to reduce emissions and improve welfare for present 
and future citizens. However the market-mediated land-use impacts 
hypothesized by GTAP and similar economic models are not merely 
inaccurate; they may indeed be estimating impacts that are opposite to 
what could be expected in the real world, particularly when biofuel 
production is backed by incentives for sustainable production, 
environmental legislation and enforcement. Much more work is needed to 
better understand the interactions among these factors, going beyond 
theories, to calibrate and validate models that reflect how behavior is 
impacted, and to better quantify the degree and direction of impacts 
from biofuels.
            Sincerely,

Virginia H. Dale, Ph.D.,
212 Whippoorwill Drive,
Oak Ridge TN, 37830.

Attachment:
Original File Name:
Date and Time Comment Was Submitted: 2009-04-22 11:37:55
                               Exhibit 17
Comment Log Display
Below Is The Comment You Selected To Display.
Comment 128 For Low Carbon Fuel Standard (LCFS09)--45 Day.
First Name: Gal
Last Name: Luft
E-mail Address: [email protected]
Affiliation:

Subject: comments on LCFS/land use
Comment:

    One can argue the land use surcharge back and forth on a 
philosophic level and on the accuracy of the model. However, there are 
several fundamental problems with the way land use surcharge is 
applied. Generally speaking land use intensity is highly cyclical. It 
corresponds mainly a combination of demand and price for agriculture 
products. The report clearly stated the case for land use intensity 
increase with increased demand for bio-fuels. However, as seen 
recently, the price of agriculture commodities are only partially 
dependent on bio-fuel demand. In Q4 of 2008 we saw record production of 
ethanol but nonetheless corn and ethanol prices fell by 70%. This means 
that corn prices are more sensitive to oil prices than to demand from 
the biofuels industry. Put those two together, and the result is that 
as oil prices go up, commodity prices go up, corn prices go up and land 
use intensity goes up with it. Then we go through a period of 
oversupply with corresponding price reduction and land use intensity 
reduction. So to the extent that bio fuels offset the demand for oil 
and put a downward pressure on gasoline price, it moderates the 
increase in land use intensity.
    The second error I see in the analysis is in the accounting of GHG 
emissions from the conversion of cattle pasture to agriculture (corn) 
land. Most cattle pasture in the U.S. is grass land. The cattle eats 
the grass and converts it to methane which is 23 times more potent then 
CO2. As corn becomes more expensive, feed become more 
expensive so meat production becomes less economical. It is logical 
that meat growers will then lease their land to corn growers. As I see 
the reality of corn expansion, brand new barren land is the last 
resort. The growers will first grow more corn on the land they already 
cultivate, then they will use land that was cultivated in the past but 
is now idle (because it was not profitable to cultivate). Then they 
would use cattle pasture that is more productive than barren land. As I 
said, the calculation of land use change from cattle pasture to corn is 
incorrect because it does not take into account the root system (corn 
has a much more robust root system which capture more CO2 
than grass root system. Corn harvesting does not involve removing the 
roots from the ground.) and it only focuses on CO2 which 
misses the potent GH effect of methane gas. Add to this the GHG 
emission of meat processing, packaging, freezing and transportation and 
you will get huge savings in GHG emissions when converting cattle 
pasture to biofuels crop.
    The third error is ignoring the fact that the same market forces 
that increase the demand for corn ethanol and with it increase in land 
use intensity, will eventually find a cheaper alternative that will 
reduce the demand for corn ethanol and with it reduce the land use 
intensity: As land become more valuable and corn more expensive, corn 
ethanol will become more expensive too. This will further increase the 
effort to invest and produce ethanol from other sources such as 
cellulosic ethanol and ethanol from algae/seaweed. These new and 
cheaper sources will undermine the demand for corn ethanol which will 
reduce the demand for land eventually causing the land to revert back 
to its original use. This demand destruction is surly within the scope 
of the timeframe that the land use change surcharge applies to.

Attachment:
Original File Name:
Date and Time Comment Was Submitted: 2009-04-19 11:24:50
                               Exhibit 18
[GRAPHIC] [TIFF OMITTED] 51922.016

[GRAPHIC] [TIFF OMITTED] 51922.017

[GRAPHIC] [TIFF OMITTED] 51922.018

                               Exhibit 19
April 3, 2009

Mary D. Nichols, Chairwoman,
c/o Clerk of the Board
Air Resources Board,
1001 I Street,
Sacramento, CA.

    Dear Ms. Nichols,

    I am writing to comment on California's proposed low carbon fuel 
standard (LCFS).
    While the LCFS clearly has noble intentions, it is flawed because 
it includes indirect land use charges to biofuels. These charges are 
unprecedented--for example, does CARB do any of the following?

   Charge electric or hybrid automobiles for the GHG emissions 
        from the fossil energy power plants used to provide their 
        electricity (or for the indirect heavy-metal emissions from 
        mining operations needed to produce their batteries).

   Charge $100k electric automobiles with the indirect GHG 
        emissions caused by their manufacture (probably 7x those of a 
        small gasoline powered vehicle).

   Charge bicycles (I'm a longtime bike commuter) for the 
        indirect GHG emissions due to the longer life expectancies and 
        bigger appetites of riders.

   Charge gasoline for the indirect GHG from the military 
        actions aimed at securing Mideast oil.

    How rational is the proposed policy if biofuels must account for 
their indirect GHG impacts while other fuels/modalities don't have to?
    Indirect land use effects are real, but difficult to quantify. But 
indirect impacts of transportation fuel sources go far beyond what 
Searchinger et al.\1\ and Fargione et al.\2\ have captured in their 
analyses, and therefore regulation on this ``partial truth'' basis is 
wrong. A first step in the right direction might be to charge fuels for 
their direct GHG emissions--this would still drive us toward better 
solutions--but in a more rational manner.
---------------------------------------------------------------------------
    \1\ Searchinger, T., Heimlich, R., Houghton, R. A., Dong, F., 
Elobeid, A., Fabiosa, J., Tokgoz, S., Hayes, D., and Yu, T.-H. (2008) 
Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through 
Emissions from Land-Use Change, Science 319 (5867) pp. 1238-1240.
    \2\ Fargione, J., Hill, J., Tilman, D., Polasky, S., Hawthorne, P. 
(2008) Land Clearing and the Biofuel Carbon Debt, Science 319 (5867) 
pp. 1235-1238.
---------------------------------------------------------------------------
    Thank you for considering my comments. I would like to emphasize 
that they are mine alone, and not those of my university, institute, or 
department.
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D Raj Raman, Ph.D., PE,
Associate Professor, Agricultural & Biosystems Engineering,
Associate Director of Educational Programs, Bioeconomy Institute,
Iowa State University.
                               Exhibit 20
Comment Log Display
Below Is The Comment You Selected To Display.
Comment 5 For Low Carbon Fuel Standard (LCFS09)--45 Day.
First Name: Richard
Last Name: Ottinger
E-mail Address: [email protected]
Affiliation: Dean Emeritus, Pace Law School

Subject: Land Use Valuation for LCFS
Comment:

    I strongly endorse the views expressed in the letter to The ARB 
submitted by Carol Werner, Executive Director of the Environmental and 
Energy Study Institute. While I am Chair of the EESI Board of 
Directors, I also am a Former Member of Congress (1964-1985), chairing 
its Energy, Conservation & Power Subcommittee; Faculty Member of Pace 
Law School and Chair of its Energy and Climate Center; and Chair of the 
Energy and Climate Specialty Group of the IUCN Commission on 
Environmental Law.
    The views expressed by Ms. Werner on the unreliability of land use 
valuations in determining the costs and benefits of bioenergy 
production are sound. There is no sound way of knowing what value to be 
placed on the indirect effects of land use on biofuels production in 
light of the inability to ascertain the effects of other land use 
demands. Also it is unwise to single out biofuels for such a valuation, 
ignoring the land use consequences of fossil fuel, nuclear and other 
energy resources; even solar and wind projects have land use 
consequences, equally unmeasurable.
    Bioenergy unfortunately has achieved strong negative bias from many 
environmental organizations because of the ill food effects of U.S. 
corn crop as a biofuel feedstock and the Indonesian catastrophe of 
using deforested areas and peat bog destructions to plant palm 
plantations for biodiesel. Standards need to be adopted to prevent such 
practices and are being developed, most particularly by the Roundtable 
on Sustainable Biofuels of the Ecole Polytechnique Federale de 
Lausanne. But putting a false value on land use just for Bioenergy, 
practically making it unmarketable, is bad energy and climate policy.
            Respectfully submitted

Richard Ottinger,
Dean Emeritus,
Pace Law School.

Attachment:
Original File Name:
Date and Time Comment Was Submitted: 2009-03-19 07:27:39
                               Exhibit 21
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                               Exhibit 22
University of Illinois at Chicago
Energy Resources Center (MC 156)
College of Engineering
April 15, 2009

California Environmental Protection Agency,
Air Resources Board,
Byron Sher Auditorium, Second Floor,
1001 I Street
Sacramento, CA

Subject: Comments on Corn Ethanol Land Use Change Analysis in the 
Proposed Regulation to Adopt the Low Carbon Fuel Standard

    Dear Air Resources Board:

    Page IV-19 of the ``Proposed Regulation to Implement the Low Carbon 
Fuel Standard'' states:

        ``A sufficiently large increase in biofuels demand in the U.S. 
        will cause non-agricultural land to be converted to crop land 
        both in the U.S. and in countries with agricultural trade 
        relations with the U.S. Models used to estimate land use change 
        impacts must, therefore, be international in scope''

    We disagree with the above statement and believe that a thorough 
regional analysis of direct and indirect land use change is superior to 
the employment of models that are international in scope. These 
international models require a host of input variables (some of which 
are shown in Table C5-1) with unknown probability distribution 
functions. A localized, or bottom-up modeling approach detailed below 
is superior and consistent with the look up tables provided in Table 
IV-20. The bottom up approach demonstrates that there is no reason why 
the ``Land Use or Other Effect'' values in the look up table cannot 
vary by pathway similar to ``Direct Emissions.''
    In most cases, ethanol plants source corn from localized, 
geographically distinct areas surrounding the plants. Our study at the 
Illinois River Energy Center (IRE) ethanol plant in Illinois which 
includes a survey of 30 growers delivering corn to this 58 mgpy plant 
shows that farmers deliver corn within a 40 mile radius ``corn draw 
area'' or ``CDA'' (see Mueller, October 2008). ProExporter Network, a 
grains flow consulting firm also regularly establishes CDA's based on 
local transport conditions and grain commodity prices. Since an ethanol 
plant's effect on corn supply starts with an easy to establish, 
geographically limited area we argue that any land use analysis of corn 
ethanol must start with an analysis of the yields, crop rotations, and 
land use conversions in that CDA.
    As a modeling example we assess land use for IRE's CDA using high 
resolution satellite imagery with additional vetting routines (see 
Mueller, December 2008). We find that (a) no significant conversion of 
non agricultural land to corn occurs, (b) yield increases surveyed for 
the CDA are sufficient to meet the ethanol plant's corn demand, and (c) 
changes in crop rotations are not explained by the ethanol plant's corn 
demand. The study concludes that the operation of the Rochelle Illinois 
ethanol plant does not contribute to land use change. Therefore, 
greenhouse gas emissions from IRE related land use change are 
insignificant. The lifecycle global warming analysis for IRE produced 
corn ethanol (including farming, conversion, distribution, denaturing) 
totals 54.8 gCO2e/MJ as established by parameterizing GREET 
for the surveyed agricultural practices in the CDA and IRE's corn 
processing technologies (N-inputs, yields, plant fuel and electric use, 
etc.). IRE started operation in December 2006 and the plant technology 
is representative of approximately 3 billion gallons of corn ethanol 
produced today.
    We realize that this is a case study of one particular plant. And, 
we do agree that a different ethanol plant built in a less productive 
agricultural area and different commodity flows may contribute to land 
use change. It follows that the share of land use effect from each 
ethanol plant differs from plant to plant but that these different 
shares cannot be captured by international trade models. High 
resolution satellite imagery is available to assess the land use effect 
for each plant from the bottom up. In contrast, high resolution 
satellite imagery is not available to model international land use 
change prompted by biofuels production (see Mueller, March 2009). 
Therefore, it is scientifically unsound to assign one land use effect 
value (30 gCO2e/MJ) to all corn ethanol produced, a value 
that is derived with an international trade model with input variables 
of unknown probability distributions.
    We are currently expanding our bottom-up modeling approach to 
include more ethanol plants. We urge CARB to provide a mechanism to 
allow individual ethanol producers to demonstrate their plant's impact 
on land use change.
            Best Regards,

Steffen Mueller, Ph.D.,
Principal Economist;
Ken Copenhaver,
Senior Engineer.

Attached References:

    Mueller, S. and K. Copenhaver, M. Wander. ``The Global Warming 
Impact and Land Use Impact of Corn Ethanol Produced at the Illinois 
River Energy Center''; October 20, 2008.
    Mueller, S. and K. Copenhaver. ``A Bottom-Up Assessment of Land Use 
Related to Corn Ethanol Production''; December 11, 2008.
    Mueller, S. and K. Copenhaver. ``Use of Remote Sensing to Measure 
Land Use Change from Biofuels Production''; March 26, 2009.
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                               Exhibit 23
American Farm Bureau Federation
March 25, 2009

Hon. Arnold Schwarzenegger,
Office of the Governor,
State Capital,
Sacramento, CA

RE: Concerns Regarding Proposed LCFS Regulation

    Dear Governor Schwarzenegger,

    We are writing with regard to the proposed California Low Carbon 
Fuel Standard (LCFS). As you may know, the American Farm Bureau 
Federation (AFBF) is the unified national voice of agriculture, working 
through our grassroots organization to enhance and strengthen the lives 
of rural Americans and to build strong, prosperous agricultural 
communities.
    Increasing America's energy resources and protecting national 
security by reducing our dependence on foreign oil and continuing to 
grow our domestic renewable fuels industry are among the most important 
challenges facing our country. As farmers and ranchers we believe that 
we can play an important role in lessening our dependence on foreign 
oil. We are concerned, however, about the direction of the current LCFS 
proposal.
    From our understanding, the LCFS was originally intended to allow 
all eligible fuels to compete on a level, carbon-based playing field. 
There is widespread agreement in the scientific and research 
communities that biofuels produced from U.S. farms have significant 
benefits over petroleum and other fossil fuels like natural gas based 
on the ``cradle to grave'' carbon emissions associated with producing 
and using the fuel. For example, soybean-based biodiesel receives a CA-
Greenhouse gasses, Regulated Emissions and Energy use in Transportation 
GREET carbon intensity score of 26 g/MJ, while corn-based ethanol 
receives a score of 67 g/MJ. Advanced biofuels like cellulosic ethanol 
and renewable diesel have even better carbon scores. These numbers are 
considerably lower than California gasoline and diesel, which CA-GREET 
scores at 96 g/MJ and 95 g/MJ, respectively.
    To be clear, the CA-GREET model accounts for the carbon emissions 
directly attributable to the full lifecycle of the respective fuel. For 
biofuels CA-GREET includes the application of fertilizer, and the land 
directly converted to produce biofuel feedstocks. For petroleum CA-
GREET includes major upstream refinery emissions. In both cases, 
transportation and combustion of the fuel is included.
    Unfortunately, the Air Resources Board (ARB) is proposing to 
enforce an additional carbon penalty against biofuels only, increasing 
the carbon score of these fuels by 40 percent or more. ARB staff calls 
the penalty ``indirect land use change.'' The effect is a ``market-
mediated'' or ``economic carbon effect'' derived by running estimated 
future biofuel demand through an economic model. The problem with this 
proposal is two-fold: (1) the science of predicting indirect, 
economically-derived carbon effects is extremely new and uncertain; 
and, (2) no level of certainty justifies enforcing economically-derived 
carbon effects against only one type of fuel.
    As to the issue of uncertainty, we note that 111 scientists 
submitted a letter detailing the state of the science and recommending 
against premature enforcement of indirect effects. We also point out 
that AIR, Inc. released a study showing that increasing corn ethanol 
production in 2015 to the same levels modeled by ARB results in zero 
indirect land use change based on updated treatment of biorefinery co-
products and crop yields. It is particularly troubling to AFBF that the 
current model runs for indirect land use change do not include inputs 
for the use of land enrolled in the Conservation Reserve Program (CRP) 
and idle cropland. The omission of CRP and idle land is problematic 
because any farmer looking to produce additional biofuel feedstock is 
most likely to look first to idle cropland so as not to disrupt current 
cash flows. A land use assessment without this factor is quite simply 
not credible or based on real world decision-making.
    As to the issue of selectivity, it is clear that all fuels have 
market-mediated carbon effects. But only biofuel is penalized for 
indirect effects. As stated in the scientist letter, ``[e]nforcing 
different compliance metrics against different fuels is the equivalent 
of picking winners and losers, which is in direct conflict with the 
ambition of the LCFS.''
    It is important to note that U.S. farming practices continue to 
advance both in sustainability and productivity. According to the 
United States Department of Agriculture (USDA), in 2008 American 
farmers produced the second largest corn crop on record and attained 
the second highest yield per acre in history with fewer energy and 
fertilizer inputs. Also, the distillers grains that are a co-product of 
ethanol production are playing a major role in providing livestock--in 
the U.S. and abroad--with high-protein, nutrient rich feed.
    The agricultural community is eager to play a central role in the 
increased use of biofuels. However, if adopted as currently proposed, 
the LCFS will uniformly dissuade the production and use of all forms of 
biofuels that utilize land and undercut what is a tremendous 
opportunity to spur economic growth in agricultural communities and 
reduce carbon emissions with American farming.
    Several different stakeholder groups, including the 111 scientists 
who submitted a letter to your office on March 2, recommended that ARB 
adopt an LCFS regulation based only on direct carbon effects, or those 
emissions directly attributable to the production and use of the 
particular fuel, while taking the lead on the further assessment of the 
indirect carbon effects of all fuels. AFBF believes that a regulation 
based on direct effects will be balanced and represents the ``level 
playing field'' your office envisioned at conception of the program.
    Thank you for your time and consideration. AFBF appreciates this 
opportunity to comment on this vitally important program.
            Sincerely,
            [GRAPHIC] [TIFF OMITTED] 51922.102
            
Bob Stallman,
President.
                               Exhibit 24
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                               Exhibit 25
Renewable Fuels Association
April 17, 2009

Mary D. Nichols,
Chairwoman,
California Air Resources Board,
Headquarters Building
1001 ``I'' Street,
Sacramento, CA.

    Dear Chairwoman Nichols,

    The Renewable Fuels Association (RFA) respectfully submits the 
attached comments on the California Air Resources Board's (CARB) 
Proposed Regulation to Implement the Low Carbon Fuels Standard (LCFS).
    As the national trade association for the U.S. ethanol industry, 
RFA appreciates the opportunity to comment on the information presented 
in the documentation published March 5, 2009. As you will see in the 
attached comments, we have prepared detailed remarks about the land use 
modeling framework, key assumptions, and fundamental approach CARB is 
using for its current lifecycle analysis of ethanol. We also offer 
comments on other aspects of the regulation, such as the decision to 
include corn ethanol in the baseline gasoline formulation.
    In general, we continue to believe CARB's analysis of indirect land 
use change is insufficient. Ongoing scientific discourse and research 
clearly suggest we are not currently able to estimate indirect land use 
changes (particularly international land conversions) with an 
acceptable degree of certainty. Additionally, we continue to believe 
the Global Trade Analysis Project (GTAP) model employed by CARB for 
this analysis requires significant refinement and validation before it 
can be reasonably used in the development of a policy framework such as 
the LCFS. Our attached comments are quite detailed in this regard, as 
we have been independently experimenting with the GTAP model and 
interacting with other GTAP modelers for much of the last year.
    Among the major concerns we have with the GTAP modeling used to 
produce the results presented in the Initial Statement of Reasons are: 
inconsistency of projected average grain yields and the period of the 
``shock''; underestimation of the significant land use ``credit'' 
provided by distillers grains (the feed co-product of grain ethanol); 
and assumptions on carbon emissions from converted forest. Several 
other concerns are discussed as well.
    Our attached comments show that GTAP modeling runs with reasonable 
adjustments to certain assumptions performed by Air Improvement 
Resource, Inc. results in corn ethanol ILUC emissions in the range of 8 
g CO2-eq./MJ. This is significantly lower than CARB's 
current estimate of 30 g CO2-eq./MJ.
    We sincerely appreciate CARB's consideration of these comments and 
look forward to further interaction with the agency as it continues 
development of the LCFS regulation. We welcome further dialog and look 
forward to responses to any of the comments offered in the attached 
documentation. We will continue to analyze the GTAP model, review the 
information provided by CARB, and respond with comments as appropriate.
            Sincerely,
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Bob Dinneen,
President & CEO,
Renewable Fuels Association.
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                          Submitted Questions
Responses from Joseph Glauber, Ph.D., Chief Economist, U.S. Department 
        of Agriculture
Questions Submitted By Hon. Tim Holden, a Representative in Congress 
        from Pennsylvania
    Question 1. Have you discussed who's going to determine questions 
like whether land was ``cleared'' prior to passage of EISA (energy bill 
from 2007)?
    Answer. USDA discussed many issues with EPA including analysis, 
assumptions, land types, record-keeping, where biomass would be 
produced, and who/what entity should be responsible for validating or 
verifying that biomass was produced from planted crops and crop residue 
harvested from agricultural land cleared or cultivated at any time 
prior to the enactment of the EISA that is either actively managed or 
fallow, and non-forested. Discussions also included history of land use 
and potential data available to verify management and usage.

    Question 2. Are you familiar with the recent International Energy 
Agency report? Do you concur with their assessment that ``As 
governments around the world try to establish the greenhouse gas 
emission benefits of various biofuels, the use of methodologies such as 
default emission factors could lead to a significant underestimation of 
the benefits unless the factors are updated on a frequent basis.''?
    Answer. I am not sure to which report of the International Energy 
Agency (IEA) that you refer; however, I do agree with the statement 
that it will be necessary to update greenhouse gas (GHG) emission 
factors as new information becomes available. Updating the models with 
more precise information will increase the ability of the models to 
accurately estimate the effects of expanding biofuels production on GHG 
emissions. I have no basis to conclude whether such updates will 
increase or reduce the estimates of GHG emissions from biofuels.

    Question 3. The estimates for the indirect emissions as measured by 
the Searchinger study and the Global Trade and Analysis Project (GTAP) 
are vastly different. How sensitive are these models to assumptions 
made? What uncertainty does this mean for the biofuel industry, or 
investors concerned with compliance issues under the renewable fuel 
standard?
    Answer. The summary below compares the Searchinger study and the 
GTAP analysis (Land Use Change Carbon Emissions Due To Ethanol 
Production, by Wallace E. Tyner, Farzad Taheripour, and Uris Baldos, 
January 2009). The comparison focuses on the 30 year ethanol case with 
no restriction on U.S. exports to be consistent with Searchinger's 
assumption on the duration of ethanol production. As indicated by the 
following discussion, the results are very sensitive to the models used 
in the analysis and the assumptions made by the researchers.
    The Searchinger study estimates that each gallon of ethanol 
generates 8,577 grams of GHG emissions through land use changes. This 
figure is roughly four times the estimate from the GTAP analysis. The 
difference is due to three factors. The first factor is how much land 
use change would occur in response to the increase in ethanol 
production. The Searchinger study suggests that land use would change 
by 0.73 hectares of land per 1,000 gallons of ethanol, while the GTAP 
analysis estimates the change in land use would amount to 0.27 hectares 
per 1,000 gallons of ethanol.
    The second factor is related to the location of changes in land 
use. The Searchinger study suggests that land use changes would occur 
mainly in areas where carbon emissions factors from land use changes 
are relatively high; while the GTAP predictions indicate that land use 
changes would take place in areas where carbon emissions from land use 
changes are much more modest. Lastly, the GTAP analysis assumes that 75 
percent of carbon stored in forest type vegetation would be released 
into the atmosphere at the time of land conversion, while Searchinger 
assumes that 100 percent of the carbon would be released. GTAP analysts 
argue that it is reasonable to assume that some of the carbon currently 
stored in trees on converted forestland would be sequestered in lumber 
for furniture, houses, and other wood products.

    Question 4. EPA is required to formulate and update assessments of 
the lifecycle emissions for biofuels. In general, how might carbon 
reduction legislation or renewable energy standards affect this 
lifecycle analysis? Would competition for feedstocks from another 
legislative standard, say a renewable electricity standard, change the 
emissions lifecycle for existing plants or practices? Likewise if 
Brazil cracked down on illegal logging, could that change a lifecycle 
analysis for a biofuel produced in the U.S.?
    Answer. A renewable electricity standard could create new markets 
for biomass feedstocks, altering land competition and land use 
dynamics. Additionally, changes in policies in other countries, such as 
Brazil cracking down on illegal land conversion, would significantly 
alter how land markets in these countries respond to the changes in 
commodity prices. It will be important to incorporate changes in 
policies, including carbon reduction legislation, and programs into the 
coefficients researchers use to calculate emissions from international 
indirect land use changes. At this time, USDA has not determined how 
the carbon reduction legislation being considered by Congress would 
affect the lifecycle analysis for biofuels. However, we believe that 
EPA should include the effects of carbon reduction legislation in the 
lifecycle analysis of biofuels--if these effects are significant--and 
if such legislation is passed by Congress prior to EPA's issuance of a 
final rule implementing the renewable fuel standard in the EISA.

    Question 5. During the interagency process it is my understanding 
that USTR was involved in the discussions. What was their concern? Do 
you think that the inclusion of indirect land use will impact the 
international climate dialogue?
    Answer. I am unaware of specific concerns. I do not believe the 
inclusion of indirect land use in the lifecycle analysis of biofuels 
will affect the international climate dialogue.

    Question 6. U.S. corn acres are projected to fall for the second 
year in a row in 2009, despite projected record levels of grain ethanol 
production. At the same time, U.S. soybean planted acres are expected 
to achieve a new record. This trend appears to run counter to the 
theory that increases in corn ethanol production would cause a 
``gobbling up'' of soybean acres and force that soy production 
elsewhere in the world. How do you account for this?
    Answer. Over the past couple of years, soybean prices have been 
running relatively strong compared to corn and other major crop prices. 
Major factors contributing to the strength in soybean prices include a 
short 2008 crop in Argentina and continued strong demand by China for 
soybeans. As a consequence, even though the demand for corn for ethanol 
production is projected to rise about nine percent in the coming 
marketing year, the profitability outlook for soybeans is enticing U.S. 
farmers to plant more beans and less corn and other crops.

    Question 7. Without a doubt, crop yield improvements play a 
significant role in mitigating the need to expand agricultural lands. 
Can you elaborate on the remarkable increases in productivity witnessed 
not only in the U.S., but in other nations, over the last 25 years and 
comment on how that impacts land use decisions?
    Answer. As you note, crop yields in the United States have 
increased significantly over the last 25 years. Globally, crop 
productivity has expanded as well. Since the early 1980s, U.S. corn 
yields have increased from about 110 bushels per acre to 153.9 bushels 
per acre in 2008, a 40 percent increase. World corn yields expanded by 
62 percent between 1980 and 2008, with Brazil's, China's, and the 
European Union's corn yields increasing by a total of 103, 83, and 53 
percent, respectively. As yields increase over time, less land would be 
needed for the production of energy crops to fulfill the renewable fuel 
standard in the EISA.

    Question 8. What are your thoughts in regard to what's been taking 
place in Brazil? What type of agricultural production was expanding 
where?
    Answer. The Amazon rainforest covers more than 500 million hectares 
or over \2/5\ of the South American continent. Over 20 percent of the 
Amazon rainforest has been converted to roads, farms, ranches, and 
dams. It is estimated that 2.7 million acres each year are being 
cleared for logging timber, large-scale cattle ranching, mining 
operations, government road building and hydroelectric plants, military 
operations, and subsistence farming by peasants and landless settlers. 
In many places, the rainforest is being burnt to provide charcoal to 
industrial plants that have been built on converted rainforest lands.
    Brazilian crop and livestock agriculture has been expanding. Major 
field crop acreage (barley, corn, cotton, oats, soybeans, cottonseed, 
peanuts, sunflower seed, milled rice, rye, and wheat) rose from 33.4 
million hectares in 2000 to a peak in 2004 of 43.8 million hectares. 
Since 2004, major crop acreage has fluctuated from a low of 41.9 
million hectares to an estimated high for 2009 of 43.7 million 
hectares.
    The soybean area harvested peaked in 2004 at 22.9 million hectares. 
Since 2004, soybean area harvested in Brazil has declined to a recent 
low of 20.7 million hectares in 2006. In 2008, 21.4 million hectares of 
soybeans were harvested in Brazil. While the soybean harvested area in 
Brazil declined from 2004 to 2008, ethanol production in the United 
States increased from 3.4 billion gallons in 2004 to 9.2 billion 
gallons in 2008.
    Brazilian animal agriculture has shown robust growth with total 
cattle numbers, measured by inventory, rising steadily from 146.2 
million head in 2000 to more than 179.5 million head in 2009. Similarly 
for swine inventory, stock has grown from 31.9 million head to 33.3 
million head in 2009. Unlike cattle, the swine industry does exhibit 
some contraction on a year over year basis, but has clearly expanded 
since 2000.

    Question 9. You don't specifically mention it in your written 
testimony's discussion of the uncertainty of determining yields on 
recently converted land, but isn't that one of the points of the 
Searchinger, et al. paper? That recently converted land will have much 
lower yields?
    Answer. The yield on recently converted land is a source of great 
uncertainty, Land productivity depends on a number of factors such as 
climate, slope, soil type, salinity, and water availability (natural 
precipitation or availability of irrigation water). In addition, 
farming practices, such as fertilizer application rates and use of 
biotech seeds, vary greatly around the world. Thus, assumptions on the 
location of converted land and the productivity of that land are very 
important parameters in the Searchinger study and in other studies that 
provide estimates of the effects of biofuels production on GHG 
emissions.

    Question 10. In your testimony you stated that the definition of 
renewable biomass in the RFS will limit the opportunity for biofuels to 
replace fossil fuels. Can you elaborate why? And do you think that 
definition of renewable biomass could be expanded to be more exclusive 
and also be environmentally responsible?
    Answer. The term renewable biomass is defined differently in 
various pieces of legislation. The definition of ``renewable biomass'' 
in the Food, Conservation, and Energy Act of 2008 includes all 
materials that are byproducts of preventative treatments on National 
Forest System lands. Preventative treatments include the removal of 
trees and other materials to reduce hazardous fuels, reduce or contain 
disease or insect infestation, or restore ecosystem heath. In contrast, 
the definition of ``renewable biomass'' in the EISA excludes these 
materials. I believe this is one instance in which the definition of 
``renewable biomass'' in the EISA could be expanded without causing 
environmental harm. There are possibly other examples in which the 
definition of ``renewable biomass'' could be broadened without causing 
environmental damage.

    Question 11. Why do you think the European Union has not used 
indirect emissions as part of their programs?
    Answer. While I have not spoken with representative from the 
European Union on this topic, my understanding is that they have 
decided not to include indirect land use in their current regulations 
but will review the issue over the next 2 years.

    Question 12. Specifically, what parts of the EPA rule on the RFS 
did you discuss with the EPA? (Indirect emissions, international land 
use changes, the definition of agricultural land, agricultural 
production outlooks . . .)?
    Answer. USDA discussed several aspects of the RFS2 EPA rule related 
to agriculture, including international land use changes, the 
definition of agricultural land, outlook for agricultural production 
and exports, fertilizer application rates, fertilizer requirements when 
removing corn stover, and forest management. In addition, we discussed 
the current conversion technology used by the U.S. corn ethanol 
industry, including ethanol yield, the production of Distillers Dried 
Grains (DDGS), and the feed nutritional benefits of DDGS, industry 
capacity, and production costs. We also discussed the supply potential 
of using other feedstocks for ethanol, such as sugarcane, sorghum, and 
wheat.
    In addition, we discussed the economic and technical feasibility of 
producing ethanol from biomass. A considerable amount of time was spent 
discussing the potential supply of biomass, the most economical sources 
of biomass, and the logistics of shipping and storing biomass.

    Question 13. Do you agree with the research done in the 2008 
Searchinger paper published in Science?
    Answer. There is little question that increased biofuel production 
will have effects on land use in the United States and the rest of the 
world. The more interesting question concerns magnitude. To the degree 
to which the supply response to increased biofuel production is met 
through increased yields, cropland expansion will be less. Land use 
change is more likely to occur where producers are more responsive to 
price changes. How much pasture and forest is converted to cropland 
will ultimately depend on the region, national and local land use 
policies and the degree to which competing uses (grazing, forest 
products) impose constraints for expansion.

    Question 14. In the last few weeks the California Air Resources 
Board adopted a rule that uses indirect emissions as part of their low 
carbon fuel standard. What affect do you think this will have on the 
market for biofuels in California, and on biofuel producers nationwide?
    Answer. The California low carbon fuel standard (LCFS) could 
potentially reduce the use of corn ethanol in California. Under the 
rule adopted by the California Air Resources Board, Midwest corn 
ethanol has higher GHG emissions than reformulated gasoline. This would 
make Midwest corn ethanol an unattractive source for California fuel 
blenders. However, the California Air Resources Board has indicated 
that it will review the parameters and models used to develop the 
emissions estimates for corn-based ethanol and other biofuels. Thus, at 
this point, it is very hard to say how the market for biofuels will 
ultimately be affected by the rule adopted by the California Air 
Resources Board.

    Question 15. In your testimony you stated that the literature on 
biofuel production and international land use has developed largely 
over the past 5 years, with most of the research on this being done for 
the domestic market, how can we build models that incorporate the 
international changes when there isn't adequate data?
    Answer. Acquiring international data to help model the effects of 
land use change is a major issue. There are three primary factors that 
affect international land use change: economic, political, and 
cultural. Most U.S. models that estimate the effects of increasing 
biofuels on land use change rely on economic data, but some economic 
data simply does not exist in many of the countries where land use 
change is occurring or expected to occur as biofuel production expands. 
While we have some experience with international agricultural models, 
we have far more limited understanding of international land use of 
pasture, rangeland and forests. For example, USDA and the Food and 
Agriculture Policy Research Institute (FAPRI) both prepare 10 year 
baselines of projected cropland use. We have not developed similar 
baselines for pasture and forestland.

    Question 16. Furthermore you stated in your testimony that ``the 
empirical literature on land use and greenhouse gas emissions is 
relatively young with most studies appearing in the last 2 or 3 
years.'' Is it responsible for expansive Federal policy such as the RFS 
to be dependent on such nascent science? Do you believe there will be a 
time when we will have a scientific consensus for this issue?
    Answer. Lifecycle analysis (LCA) has historically been used to make 
comparisons at a point in time, e.g., comparing the environmental 
benefits of a biofuel versus a petroleum fuel. Previous LCA of biofuels 
has not considered significant indirect impacts so EPA and others have 
combined LCA models with economic models to help estimate the effects 
of the RFS2 on land use change. While there is little doubt that 
increased biofuel production will have effects on land use in the 
United States and the rest of the world, there are uncertainties in the 
magnitude. Data on production, input use, historical and current land 
use, and distribution of land by type, for most developing and emerging 
economies is poor to non-existent. The empirical literature on land use 
and GHG emissions is relatively young, with most studies appearing in 
the last 2 or 3 years. Sensitivity analysis suggests wide variation in 
results. Key sources of uncertainties in these analyses include:

   The amount of change in land use;

   Differences in the sources of land being converted and the 
        part of the world the where the change in land use occurs; and

   Differing assumptions regarding the percent of carbon stored 
        in forest vegetation that is emitted when forest is converted 
        into cropland.

    In addition to the analytic uncertainties, there are also questions 
about the policy response of governments to land conversion. To the 
degree to which the supply response to increased biofuel production is 
met through increased yields, cropland expansion will be less. How much 
pasture and forest is converted to cropland will ultimately depend on 
the region, national and local land use policies, and the degree to 
which competing uses (grazing, forest products) impose constraints for 
expansion.

    Question 17. Can you explain the role Distillers Dried Grains 
(DDGS) and other co-products play in a lifecycle emission analysis?
    Answer. For every bushel of corn converted to ethanol in a dry mill 
plant, about 17.5 pounds (\1/3\ of a bushel equivalent) of DDGS (27 
percent protein) is produced. DDGS have feeding value and may be used 
to replace corn and soybean meal in feed cattle and dairy feed rations. 
Small amounts of DDGS can also be used in hog and poultry feed rations. 
On a feed value basis, 1 pound of DDGS could replace up to 1.27 pounds 
corn and soybean meal in livestock rations, though for nutritional 
reasons, DDGS can only replace a portion of the corn and soy fed to 
livestock (Argonne National Lab). Since DDGS has value as a livestock 
feed, researchers have generally agreed that the lifecycle analysis 
should at least allocate a portion of the emissions produced in ethanol 
production process to DDGS.
    In a lifecycle emission analysis (LCA), GHG emissions need to be 
allocated to all end products not just ethanol. There are a number of 
ways various researchers have allocated GHG emissions, such as energy 
content of ethanol versus DDGS, mass basis (weight of ethanol versus 
weight of co-products), displacement/replacement approach, and the 
ASPEN Plus Model which estimates the energy used in every stage of the 
production process (i.e., energy used to dry DDGS assigned to DDGS). 
Each of these different approaches for allocating emissions between 
ethanol and DDGS yield different estimates of lifecycle emissions 
attributed to ethanol.

    Question 18. Your testimony highlighted timeframe assumptions in 
emission models as an area of uncertainly. How does the timeframe a 
model uses affect the results? Why are these assumptions important?
    Answer. GHG emissions associated with land use change result from 
releases of much of the carbon into the atmosphere that was previously 
stored in the soil. These emissions can be viewed as one-time events 
that typically occur when lands shift from pasture, grassland, or 
forest into crop production. Hence, emissions related to bringing new 
land into production are generally concentrated in the year of 
conversion and the first couple years thereafter, creating what is 
referred to in the literature as a ``carbon debt''. In contrast, 
growing biofuel feed stocks offsets the use of fossil fuels and removes 
carbon dioxide from the atmosphere which overtime can offset the 
upfront ``carbon debt'' associated with land use change.
    Using a shorter timeframe for the lifecycle analysis makes it less 
likely that the ``carbon debt'' created for keeping newly converted 
land in crop production will be offset by the annual carbon emission 
benefits of growing crops for biofuel production. Thus, the shorter the 
timeframe the more likely ethanol and other biofuels will not achieve 
the GHG emissions reduction targets contained in the EISA.
Questions Submitted By Hon. Stephanie Herseth Sandlin, a Representative 
        in Congress from South Dakota
    Question 1. Would you agree that even the best available 
methodologies and models have proven to be significantly imprecise in 
predicting indirect land use changes?
    Answer. Models are representations of reality and will not 
replicate reality with 100 percent certainty. Second, it is important 
to recognize that the questions being asked of these models may not be 
the types of questions that the models were originally intended to 
answer. Third, a number of factors are driving land use change not only 
in the United States, but around the world: factors such as population 
growth and urban encroachment; economic development; agriculture and 
forestry production; and policy to mention a few. In reality, we do not 
know at this point in time how precise or imprecise these model 
forecasts or projections are to predict direct and indirect land use 
changes, land conversion, and GHG emissions on a global scale, though 
we know some of the major sources of uncertainty.

    Question 2. Would you also agree that we will need the most current 
economic and agricultural data available to arrive at a level of 
consensus on approaches to determining indirect effects?
    Answer. The more current the data, the better the analysis should 
be. For example, a snap shot of satellite images for two points in time 
2001 and 2004 was used by Winrock International to determine what types 
of land (e.g., forest or grassland) are cleared when agricultural 
production expands. These data show crop expansion by type of land due 
to political, economic, social and a variety of other factors. The 
factors driving land use change from 2001 to 2004 are not necessarily 
the same factors driving land use change between 2005 and 2008.

    Question 3. Do you believe that USDA has available to it the 
resources necessary to initiate a research effort that fairly 
determines such indirect effects?
    Answer. USDA has a limited number of models that can partially 
address some of the issues dealing with land use change. We believe the 
best path for moving forward is to continue to work collaboratively 
with EPA, DOE and the academic community to further refine existing 
models to address land use changes. This would be the most expedient 
process for developing a consensus on the effects of biofuels on land 
use.

    Question 4. Is there additional support that Congress can provide, 
and specifically, we on the Agriculture Committee? For instance, would 
some additional appropriations for USDA for this purpose in Fiscal Year 
2010 be needed in order to accurately resolve these issues as quickly 
as possible?
    Answer. We believe the best path for moving forward is to continue 
to work collaboratively with EPA, DOE and the academic community to 
further refine existing models to address land use changes. In 
addition, the Administration's FY 2010 budget proposal would provide an 
additional $5 million to the Office of the Chief Economist for climate 
work. Some of this funding would be used to address land use issues.
Questions Submitted By Hon. Deborah L. Halvorson, a Representative in 
        Congress from Illinois
    Question 1. Dr. Glauber, do you feel that U.S. policy on renewable 
fuels are the sole influencer of land use change in other countries 
such as the deforestation occurring in Brazil? What do you believe are 
the other variables that need to be analyzed? Do you feel we have 
models today that can accurately do this? Do you feel that crude oil 
prices have an effect? How large?
    Answer. U.S. renewable fuels policy is not the sole influence of 
land use change in Brazil and other countries in the world. There are 
many factors that influence land use change in other countries besides 
U.S. policy on renewable fuels. The rainforest in Brazil is being 
destroyed and fragile lands elsewhere are being converted to cropland 
due to political, social, and economic reasons. In Brazil, the 
rainforest is being cleared for logging timber, large-scale cattle 
ranching, mining operations, government road building and hydroelectric 
plants, and subsistence agriculture.
    It is clear from the analyses that land conversion is sensitive to 
many variables--some of which can be influenced by government policies 
or actions. To the degree to which the supply response to increased 
biofuel production is met through increased yields, cropland expansion 
will be less. How much pasture and forest is converted to cropland will 
ultimately depend on the region, national and local land use policies 
and the degree to which competing uses (grazing, forest products) 
impose constraints for expansion.
    The models that we currently have are limited in their ability to 
estimate direct and indirect land use change associated with biofuels 
production. This assessment is based on the lack of data and definitive 
analysis of the factors affecting global land use changes. This lack of 
data and analysis leads to widely varying differences on the effects of 
U.S. biofuels policy on land use. However, the analysis does focus 
exclusively on the changes in land use caused by U.S. renewable fuels 
policy; projections about other economic, political, and cultural 
trends that might affect future land use are reflected in the model 
baselines.
    Oil prices do have some affect on land use. Higher oil prices lead 
to higher prices for gasoline, diesel fuel, and other energy related 
production inputs. Generally, we would expect producers to respond to 
higher production costs by reducing acreage planted but when oil prices 
are high, the demand for alternative energy sources rises pushing up 
the price of crops used to produce biofuels. Due to the offsetting 
effects of higher oil prices on production costs and the prices of 
crops used to produce biofuels, the effects of crude oil prices on land 
use are expected to be relatively small.

    Question 2. Dr. Glauber, USDA has a wealth of global data to 
predict future trends in agriculture. Does USDA have the computer 
models sophisticated enough that you would be willing to build 
regulations on their predicted results around the indirect land use 
changes of renewable fuels?
    Answer. While USDA has developed numerous models over the years to 
examine specific issues that are germane to these topics, we do not 
have an integrated, interdisciplinary model(s) or modeling system to 
address global land use changes issues of the sort addressed in the 
proposed RFS2 rule. We have drawn heavily on the work of other 
researchers. EPA's analysis uses a suite of models to address the issue 
of indirect land use change.

    Question 3. Dr. Glauber, do you believe that through technology 
improvements that crop yields in not only the U.S. but the world will 
continue to increase?
    Answer. We continue to see remarkable gains in crop productivity 
both in the United States and globally through the application of 
biotechnology and conventional plant breeding. For most crops, yields 
in the United States are well above those in the rest of the world. 
Nevertheless, foreign crop producers are continuing to adopt new seeds 
and improved farming methods that will allow them to boost yields over 
the coming years. Higher commodity prices and returns to farming will 
support these advances.

    Question 4. How will USDA address the lack of scientific 
understanding of how to measure the sustainability of biofuels, 
including indirect land use change? How can USDA help advance 
scientific analysis to address the scientific uncertainties that are 
inherent in trying to evaluate international land use issues related to 
biofuels production?
    Answer. We do need to develop better models for measuring the 
sustainability of biofuels, include indirect land use change. USDA will 
continue to work on these issues in conjunction with the academic 
community, the U.S. Department of Energy, the U.S. Environmental 
Protection Agency, and other stakeholders interested in advancing the 
science of measuring the sustainability of biofuels. In recent years, 
USDA economists and scientists have participated in a number of 
workshops and have been involved in research projects to evaluate the 
current state of knowledge and identify the research needed to more 
accurately measure the effects of biofuels on indirect land use change 
and GHG emissions.

    Question 5. From a rural development and agricultural management 
point of view, how can USDA help maximize the sustainability of 
biofuels?
    Answer. USDA can maximize the sustainability of biofuels by 
continuing to put emphasis on research programs that boost agricultural 
productivity, increase energy efficiency, and lead to advances in 
agricultural management practices that promote sustainable resource 
use. In addition, we must continue to develop partnerships with the 
Department of Energy and other stakeholders to ensure that we are all 
working together to accelerate the commercialization of more efficient 
biofuel conversion technologies and next-generation biofuels.

    Question 6. The biotechnology industry has played a key role in 
increasing crop yields, developing enzymes for advanced biofuels, 
ethanologens for sugar conversion, algal systems, and new processes to 
make biobutanol and green gasoline. How will you further incorporate 
modern biotechnology into the USDA mission?
    Answer. USDA research programs have been very successful in 
increasing crop yields, developing new farming methods that are more 
sustainable, and creating more efficient processes for converting 
crops, crop residues, and other feed stocks into biofuels. The Obama 
Administration is committed to continuing this important research that 
is essential to reducing our dependence on foreign oil sources, 
reducing GHG emissions, and mitigating the effects of climate change. 
USDA scientists, in coordination with researchers from the private 
sector, will continue their commitment to developing new seed varieties 
and sustainable management practices that will enable the agriculture 
sector to produce food to feed a growing population and energy that is 
less polluting and less dependent on foreign sources.

    Question 7. At least for the last 30 years world crop acreage has 
been steadily going up while the U.S. crop acreage for the most part 
has been flat. In this past year U.S. acreage went up 7 million acres 
and the world went up 57 million acres. How could a 7 million rise in 
crop acreage in the U.S. cause a 57 million acre rise in the world? For 
2009 U.S. crop acreage actually went down, did the world crop acreage 
fall?
    Answer. The rise in world crop acreage in 2008 was driven by the 
very same forces that drove acreage higher in the United States. 
Producers throughout the world responded to sharply higher prices for 
most commodities in the fall of 2007 and spring of 2008 by planting 
more acreage. Our estimates of 2008 harvested area for grains, 
oilseeds, and cotton, suggest that the relative increase for the United 
States, at 2.5 percent, was actually larger than that for the rest of 
the world, at 0.9 percent. USDA's world crop area numbers for 2009 are 
still relatively tentative with planting of summer crops still ongoing 
in the Northern Hemisphere and planting for 2009 crops in the Southern 
Hemisphere still months away. Again, based on our projections of 
harvested area for grains, oilseeds, and cotton, world crop area is 
expected to increase in 2009, but by less than half of one percent. 
Offsetting increases in the rest of the world, area in the United 
States is expected to fall by about four percent, primarily reflecting 
reduced plantings of winter wheat last fall.
Responses from Margo T. Oge, Director, Office of Transportation and Air 
        Quality, Office of Air and Radiation, U.S. Environmental 
        Protection Agency
Questions Submitted By Hon. Tim Holden, a Representative in Congress 
        from Pennsylvania
    Question 1. Have you discussed who's going to determine questions 
like whether land was ``cleared'' prior to passage of EISA (energy bill 
from 2007)
    Answer. We have crafted the RFS2 proposal in such a way as to 
implicitly address the issue of whether agricultural land or land on 
which tree plantations are situated had been cleared prior to passage 
of EISA. We have proposed to define the term ``existing agricultural 
land'' as cropland, pastureland, or Conservation Reserve Program land 
that existed as of December 2007 (and continuously thereafter). As long 
as land was being used as cropland, pastureland, or CRP land on 
December 2007, we would presume it to have been cleared (or cultivated) 
prior to December 2007. Likewise, we have proposed to define the term 
``actively managed tree plantation'' to mean tree plantations that 
existed as of December 2007 (and continuously thereafter). Again, we 
would presume that a tree plantation that can satisfy our proposed 
definition for ``actively managed tree plantation'' would automatically 
satisfy the requirement that it have been cleared prior to passage of 
EISA.
    We have proposed that the responsibility for verifying that 
feedstocks come from ``existing agricultural land'' or ``actively 
managed tree plantations'' falls on the renewable fuel producer and 
that they acquire and maintain documentation from their feedstock 
producers to support their claims. This documentation would be reviewed 
as part of the producer's annual audit (``attest engagement''), and EPA 
would conduct any supplemental oversight or auditing if inconsistencies 
were reported based on that audit.

    Question 2. Are you familiar with the recent International Energy 
Agency report? Do you concur with their assessment that ``As 
governments around the world try to establish the greenhouse gas 
emission benefits of various biofuels, the use of methodologies such as 
default emission factors could lead to a significant underestimation of 
the benefits unless the factors are updated on a frequent basis.''?
    Answer. EPA is familiar with the recent International Energy Agency 
report ``An Examination of the Potential for Improving Carbon/Energy 
Balance of Bioethanol'' under IEA Task 39 Commercializing 1st and 2nd 
Generation Liquid Biofuels from Biomass.
    The paragraph to which the question refers suggests that lifecycle 
greenhouse gas assessments should consider future developments in 
addition to historical data. EPA has worked with the U.S. Department of 
Agriculture, the U.S. Department of Energy, and industry experts to 
incorporate technology improvement projections (e.g., biorefinery 
efficiency improvements, agricultural yield improvements) and 
socioeconomic trend projections (e.g., food consumption, GDP, 
population growth) into the lifecycle in order to account for expected 
future developments. EPA will continue to refine data and assumptions 
in coordination with other Federal departments and other experts as we 
progress to the final rulemaking. Additionally, following publication 
of the final rule we will continue to update our methodology to 
incorporate new information and advancements.

    Question 3. The estimates for the indirect emissions as measured by 
the Searchinger study and the Global Trade and Analysis Project (GTAP) 
are vastly different. How sensitive are these models to assumptions 
made? What uncertainty does this mean for the biofuel industry, or 
investors concerned with compliance issues under the renewable fuel 
standard?
    Answer. It is true that models are sensitive to certain key inputs, 
like crop yields. This is one reason why EPA's proposal identifies and 
conducts sensitivity analyses around these key inputs. In addition, we 
are working with numerous scientists and stakeholders and conducting 
peer reviews to ensure that we use the best available data in our 
modeling through an open transparent process. The intent of this 
process is to ensure a final rulemaking that provides clarity and 
stability for the biofuels industry.
    It is also important to note that regardless of the models and 
assumptions used in the many studies that have been conducted to date 
on lifecycle analysis, a number of studies have shown that indirect 
land use emissions comprise a significant portion of the total 
lifecycle emissions of some biofuel pathways. Therefore, these impacts 
should be accounted for in order to ensure an accurate and 
scientifically credible assessment of the GHG impact of renewable 
fuels.

    Question 4. EPA is required to formulate and update assessments of 
the lifecycle emissions for biofuels. In general, how might carbon 
reduction legislation or renewable energy standards affect this 
lifecycle analysis? Would competition for feedstocks from another 
legislative standard, say a renewable electricity standard, change the 
emissions lifecycle for existing plants or practices? Likewise if 
Brazil cracked down on illegal logging, could that change a lifecycle 
analysis for a biofuel produced in the U.S.?
    Answer. Policy developments such as those described above are 
important to consider. The Agency has incorporated current policy 
regimes into the proposed lifecycle analysis. For example, we are 
working closely with experts in Brazil to ensure that Brazil's land use 
and enforcement policies are appropriately incorporated into the 
lifecycle models. EPA has met with experts and representatives from 
other countries (e.g., EU countries, Argentina) regarding their current 
biofuel and agricultural policies to accurately inform our models and 
have consistently invited countries and foreign companies inquiring 
about renewable fuels to share data and policy information with us for 
analytical refinement.
    Moreover, should significant policy developments occur in the 
future that would impact the lifecycle analysis, we will update our 
lifecycle analysis accordingly. However, we feel it is not appropriate 
to attempt to predict and incorporate future policy passed by Congress 
or other countries into the lifecycle analysis.

    Question 5. During the interagency process it is my understanding 
that USTR was involved in the discussions. What was their concern? Do 
you think that the inclusion of indirect land use will impact the 
international climate dialog?
    Answer. EPA continues to work with USTR and other agencies to 
ensure that the RFS rule will comply with all trade obligations.

    Question 6. While the focus of this hearing is mostly on ILUC, can 
you elaborate on the findings of EPA's DIRECT emissions lifecycle 
analysis for ethanol? I understand your agency's analysis showed that 
most ethanol offers an approximate 50% reduction in direct GHG 
emissions relative to petroleum than previously believed. Can you 
elaborate on the reasons for this reduction being greater than previous 
EPA estimates?
    Answer. If indirect land use change is excluded from the analysis, 
most corn ethanol offers an approximately 50% reduction in GHG compared 
to petroleum gasoline. However, this is not an indication of direct 
impacts. Our methodology includes both direct and indirect impacts 
together. The indirect impact modeling accounts for land use change, as 
well as other ``positive'' indirect impacts in terms of biofuels GHG 
emissions, such as reductions in livestock emissions and shifting of 
crop production to regions with lower GHG impacts. Therefore it is 
important to consider the results with all indirect impacts, including 
indirect land use change. Inclusion of these ``positive'' indirect 
impacts was not done in our previous analyses. We also project 
advancements in ethanol energy efficiency that result in lower 
estimates of emissions than previously considered.

    Question 7. I understand EPA relied on satellite data and imagery 
from 2001-2004 to estimate the types of lands that might be converted 
as a result of U.S. biofuels expansion. While this data might be 
helpful in determining what types of land were converted to other uses 
during a brief period at the beginning of this decade, I'm assuming 
this data does not provide any insight into the CAUSE of the land 
conversion. Is that correct?
    Answer. The satellite data is not used to attribute unique causes 
to each instance of land conversion, but rather, it allows us to 
project the type of land converted into cropland for a variety of 
reasons. Our modeling assumes that the same mix of land types will be 
converted to cropland in the future if demand for cropland increases. 
We use economic modeling to predict how changes in demand for crops 
determine the amount of new cropland that will result. Thus, in our 
analysis, the causes of crop expansion are captured with economic 
modeling. We rely on well-established economic models to project the 
amount of crop expansion in each country resulting from increased 
biofuel production. We then use satellite data to determine not the 
amount of land that might be converted, but what types of land will be 
used in a particular country if additional land is needed for crop 
production as a result of U.S. biofuels expansion, based on land use 
change patterns determined from satellite imagery from 2001 to 2004.
    That being said, we recognize that this is an area of potential 
uncertainty. Therefore, the use of satellite data is one of the 
components of the lifecycle analysis that we are having peer-reviewed 
and have specifically asked for comment on throughout the rulemaking 
process. We also have sought input from our Agency partners, including 
USDA, on this issue.

    Question 8. The International Energy Agency report also challenged 
the biofuels industry to keep better track of its performance. Are you 
working with the biofuels industry on that front?
    Answer. EPA has an extensive history of working with the biofuels 
industry and other stakeholders. These interactions have helped us 
craft approaches in our regulations to help keep better track of 
performance. For example, our RFS2 proposal includes new registration 
and reporting requirements for biofuel producers which will help us to 
better quantify and track individual producers' performance and the 
industry's performance overall. The registration requirement will help 
us understand the feedstocks, processes, energy sources, and products 
that existing facilities are capable of utilizing or producing. In 
addition, we also are proposing that producers submit an annual 
production outlook report. This report will help us gauge the overall 
direction of the industry, including anticipated biofuel production 
volumes and facility expansions or other changes being planned or 
underway. This information will help us set the annual RFS standards 
for each of the four categories of renewable fuel, as well as feed into 
any future analyses of the industry as well as supporting our future 
lifecycle modeling efforts.
    Furthermore, EPA is currently undergoing a separate rulemaking that 
would require industrial sources that emit above a certain threshold of 
GHGs per year to report these emissions to EPA. Biofuel production 
facilities that meet or exceed the threshold would be required to 
report their emissions, providing EPA with additional, facility-
specific data that will help us track the industry's performance.

    Question 9. In your testimony you discussed the statutory emission 
reduction thresholds for each of the four different renewable fuel 
categories. Also in statute are explicit provisions that give the 
authority for EPA to reduce the emission reduction thresholds. Under 
what circumstances would you consider using this authority?
    Answer. EISA stipulates the conditions under which EPA may make an 
adjustment to the GHG emission reduction thresholds. All such 
adjustments must be the ``minimum possible adjustment'' and result in 
the ``maximum achievable level'' of GHG reduction, taking cost into 
consideration. There are additional criteria for the fuel-specific 
thresholds. For the 20 percent threshold applicable to all renewable 
fuel, the adjusted level must be that achievable by ``natural gas fired 
corn-based ethanol plants, allowing for the use of a variety of 
technologies and processes.'' For the 50 percent thresholds applicable 
to advanced biofuel and biomass-based diesel, and the 60 percent 
threshold applicable to cellulosic biofuel, an adjustment must allow 
for the ``use a variety of feedstocks, technologies, and processes.'' 
Finally, adjusted thresholds can be no lower than ten percent below the 
thresholds specified in EISA.
    In our Notice of Proposed Rulemaking for the RFS2 program, we have 
proposed that the GHG threshold for advanced biofuel be lowered to 44 
percent, or potentially as low as 40 percent. This proposal is based on 
our projection that imported sugarcane ethanol is the only renewable 
fuel available in sufficient volumes over the next several years to 
allow the statutory volume requirements for advanced biofuel to be met. 
Based on the preliminary lifecycle analysis conducted for the proposal, 
sugarcane ethanol would achieve a 44 percent reduction in GHGs. The 
final adjustment would depend upon the updated lifecycle analyses 
conducted for the final rule.
    Similarly, due to the projected insufficiency of waste grease 
feedstocks that could be used to produce biodiesel or renewable diesel 
meeting the 50 percent GHG threshold for biomass-based diesel, we take 
comments on reducing this threshold to 40 percent in combination with 
an allowance for biodiesel producers to average the GHG reduction 
profile of their soy oil and waste fats and greases feedstocks. These 
adjustments would allow biodiesel producers to utilize sufficient 
volumes of feedstocks to meet or exceed the 1.0 billion gallon volume 
mandate established by EISA for biomass-based diesel in 2012.

    Question 10. In your written testimony you said that the EPA has 
developed a ``robust and scientifically supported methodology that 
identifies direct AND indirect emissions, including those resulting 
from international land use changes.'' When you say you have developed 
a scientifically supported methodology, are you including the 125 
scientists who submitted a letter to the California Air Resources Board 
during the public comment period who wrote that the science for 
indirect emissions from land use changes is NOT ready for 
implementation in the California Low Carbon Fuel Standard?
    Answer. EPA has consulted with dozens of noted experts in 
developing our lifecycle assessment for biofuels including those from 
industry, academic researchers and experts from USDA and DOE. These 
experts have presented a range of viewpoints and information that 
enabled the Agency to prepare a technically and scientifically sound 
analysis of the full lifecycle GHG emission impacts of biofuels, using 
well-accepted, peer-reviewed models. We also anticipate that the 
feedback we receive through the lifecycle workshop and peer review will 
further improve our analysis.
    We also have coordinated with California's Air Resources Board. We 
note that California's Air Resources Board received numerous comments, 
including those from a large number of scientists who supported their 
proposed assessment of both direct and indirect land use impacts. After 
considering all comments received, the Board voted almost unanimously 
to adopt the rules which included land use impacts.

    Question 11. Given the uncertainty of the science and lack of 
confidence for methodologies surrounding indirect emissions from land 
use changes how do you think the decisions to use indirect land use 
changes as part of the RFS proposed rule is reconciled with the March 
9, 2009 the White House memo calling for ``science and the scientific 
process must inform and guide decisions'' for the Administration?
    Answer. EPA's work is using science and the scientific process to 
inform and guide decisions. For example, dozens of scientists and EPA 
experts have established that indirect emissions comprise a significant 
portion of the total lifecycle emissions of biofuels. In creating our 
lifecycle methodology we turned to use of well-established models, 
tools, and data. We also recognize that lifecycle analysis is a new 
part of the RFS program and that much of our methodology represents 
groundbreaking science. Therefore we have proceeded in a manner 
consistent with the President's call to guide decisions on science in a 
transparent process. EPA's proposal describes in depth the lifecycle 
analysis methodology and highlights the assumptions and model inputs 
that particularly influence our assessment. We have conducted a 
sensitivity analyses on key parameters and demonstrate how our 
assessments might change under alternative assumptions. Additionally, 
EPA is conducting formal peer reviews of several key components of the 
lifecycle methodology. Lastly, the Administrator recently extended the 
comment period on the proposed rule by 60 days in order to provide 
additional time for review of EPA's work.

    Question 12. Please describe in detail the work you have done to 
develop methodologies to measure the indirect emissions from 
conventional fuels in general? Specifically, what work have you done in 
this area regarding the production of gas and oil from tar sands and 
oil shale?
    Answer. Based on the EISA requirements, we compare the lifecycle 
emissions of biofuels to the average 2005 emissions of producing either 
petroleum gasoline or diesel fuel depending on what fuel the biofuels 
replace. We use the same lifecycle boundaries for biofuels and 
petroleum-based fuels when addressing both domestic and international 
greenhouse gas impacts, including extraction emissions from crude oil. 
In 2005, five percent of crude was Canadian tar sand, one percent was 
Venezuela extra heavy, and 23 percent was heavy crude.
    The direct emission factors for Canadian tar sand production were 
based on the GREET model Version 1.8b, and emission factors for other 
non-conventional sources of heavy crude were based on analysis done by 
EPA for the proposed rulemaking. We plan to update these factors for 
our final rulemaking analysis with, for example, work done by the U.S. 
Department of Energy's National Energy Technology Laboratory (NETL) 
that estimates the average lifecycle GHG emissions from petroleum-based 
fuels sold or distributed in 2005.
    With regard to analyzing the direct and indirect emission impacts 
of petroleum fuel production, our work to date has found that the 
indirect land use change emissions are insignificant because, unlike 
biofuels, there is not the same opportunity cost of land. This is 
because the land needed for petroleum extraction is not replacing land 
that would otherwise be used to provide resources for an existing 
market (i.e., crop based biofuels displacing crops used for feed). 
However, for the final rule we are evaluating other indirect impacts 
associated with petroleum fuel production, such as petroleum product 
supply and demand changes associated with a marginal change in 
transportation fuel use. This will need to be evaluated in the context 
of the Act requirements of using a 2005 average baseline for petroleum 
fuels.
    In the proposed rule we are seeking comment on EPA's work on this 
topic and on the best approach for analyzing each aspect of the 
petroleum lifecycle.

    Question 13. In your testimony you stated that the burden for 
ensuring feedstock eligiblity for the RFS program will rest on the 
biofuel producer. What is the expected cost of compliance for a biofuel 
producer? Does this rule expose biofuel producers to citizen or 
environmental lawsuits if non-eligible feedstocks are used? Under any 
enforcement mechanism, do you expect the EPA to go onto a farm to 
verify land or feedstock eligibility for the RFS?
    Answer. In the analysis that accompanies the RFS2 proposal, we have 
estimated the cost of compliance for renewable fuel producers to be 
roughly $2,000 annually per producer; however, we realize that this sum 
may actually be higher or lower depending on a producer's business 
practices. We are seeking comment from industry on this estimate for 
the final rule. We do not believe that our proposal exposes biofuel 
producers to lawsuits to a higher degree than their current exposure 
under the existing RFS program.
    As for whether or not EPA would have to visit a farm to verify 
feedstock production, our main proposal would not envision having EPA 
visit farms. The proposal seeks comment on a variety of alternatives 
that could help inform our enforcement efforts while limiting any 
visits to or audits of feedstock producers' records, including using 
aerial photography or satellite imagery to identify general land use 
trends. We also investigated several options besides our proposed 
option, including use of data already collected by USDA to help us 
ensure compliance with the renewable biomass provision. However, due to 
USDA policy and new data-sharing restrictions contained in the 2008 
Farm Bill, this option does not appear to be available to us. We are 
continuing to work with USDA on this issue.

    Question 14. Have you made available the specifics of your modeling 
on land use changes? So that people can see what your assumptions were.
    Answer. Yes. All of the information supporting EPA's analysis is 
now available in the public docket for the rule. This information 
includes a full description of each of the models we used, all of our 
assumptions, and all of the empirical data used (e.g., input and output 
files). In addition to this availability, during the development of our 
assessment, we shared our plans and assumptions with USDA and other 
Federal agencies and with a wide variety of stakeholders including 
those from the biofuel industry as well as the agricultural industry. 
Important assumptions such as growth in crop yields were coordinated 
prior to our finalizing our assessments to make sure we benefited from 
full industry input. Then, after completing our analyses, we shared the 
results again with our Federal partners, the affected industry members 
and other experts as part of our open rulemaking process, all before 
processing the rule for public release.

    Question 15. EPA says their modeling shows that ethanol reduces 
greenhouse gases by 16% compared to gasoline, however that is after you 
penalize corn based ethanol by 40% for the indirect international land 
use. This is a significant reduction. Will you provide the modeling 
that you have used to determine this reduction to the public and to 
this Committee? Knowing full well that farmers in Brazil and other 
countries base a number of factors, exports, weather, local needs, have 
been changing their practices for decades--how did you arrive at this 
penalty based on one use--corn ethanol?
    Answer. We have made all of our modeling (including all of the 
assumptions and key variables) available to the public. EPA has both 
shared this information with our stakeholders via numerous meetings and 
presentations and provided it in the public docket.
    In determining indirect impacts, the methodology we have developed 
isolates the impacts of biofuels production, which allows us to 
differentiate and assign just the land use change directly caused by 
increases in renewable fuels. This approach considers the impacts of 
increased biofuels production versus a baseline that incorporates the 
number of other factors you mention. Therefore the only change we 
measure is from biofuels production, keeping all other factors 
constant. As noted above, this approach is described in detail in the 
proposed rule.

    Question 16. Yesterday's Presidential Directive directed EPA to 
solicit peer reviewed, scientific data on the indirect land use 
component, and this is the issue that all the media seems to have 
focused on--yet, your testimony seems to gloss over it. Do you not 
think it is important?
    Answer. As I described in my oral and written testimony, EPA 
considers peer review a critical component of our lifecycle methodology 
and the scientific process. This is why we made conducting these 
reviews during the public comment period a top priority. The reviews 
are focused on four areas of our lifecycle assessment that in 
particular charted new ground: use of satellite data to project future 
the type of land use changes; land conversion GHG emissions factors 
estimates used for different types of land use; estimates of GHG 
emissions from foreign crop production; methods to account for the 
variable timing of GHG emissions; and how the models are used together 
to provide overall lifecycle GHG estimates. The reviews are being 
conducted following OMB's peer review guidance that ensures consistent 
government-wide implementation of peer review and according to EPA's 
longstanding and rigorous peer review policies.

    Question 17. Can you describe to me the process whereby EPA 
determined how it would measure indirect effects associated with 
biofuel production? What is the scientific basis? What data does the 
EPA possess that demonstrates indirect effects associated with biofuels 
production?
    Answer. Measuring the indirect effects of biofuels is based on the 
fact that in any given year, the use of biofuel production requires 
land that would have been used for other uses absent use for biofuels. 
Therefore, there is an opportunity cost associated with using 
feedstocks or land for biofuels that would have otherwise been used for 
an alternate use absent the biofuel production. EPA has relied on peer-
reviewed agricultural sector models to conduct this work. These models 
are used (and have been used historically) to predict how the market 
will respond to these type of changes. This work has established that 
indirect emissions comprise a significant portion of the total 
lifecycle emissions of biofuels.
    In developing a lifecycle methodology that incorporated indirect 
effects we focused on maximizing transparency and utilizing the many 
noted experts in this field, including those from industry, academic 
researchers and other Federal agencies. For example, we met regularly 
with the USDA and turned to their experts for key data points (e.g., 
crop yield assumptions). The range of viewpoints and information we 
have received through this process has enabled the Agency to prepare a 
technically sound and scientifically robust analysis of the full 
lifecycle GHG emission impacts of biofuels. We then built on this 
process by holding a 2 day public workshop on the lifecycle methodology 
and conducting a formal, scientific peer review of key elements of the 
methodology.

    Question 18. Will the EPA make all of its analysis and the models 
it used to determine indirect land change available to the public? If 
so when? If not, why not?
    Answer. All models, data, spreadsheet calculations, and results 
input and generated in the lifecycle analysis are publicly available. 
Please see the NPRM docket at www.epa.gov/otaq/renewablefuels/
index.htm. In addition, EPA recently held a 2 day public workshop on 
our lifecycle analysis during which each major element of the 
methodology was presented and discussed.

    Question 19. It is clear that there is no scientific consensus that 
indirect land use change is the result of increased biofuels production 
(cite the 111 Ph.D. letter among others). Indirect land use is not a 
parameter for Life Cycle Analysis as set forth by the International 
Standards Organization in ISO 14040 and 14044. The EU decided to 
postpone the inclusion of indirect effects in its assessment of GHG 
emissions. The State of California recognizes that there are problems 
with quantification of indirect effects as part of their low carbon 
fuel standard and decided to study this theory over the next 20 
months--why does the EPA persist in including indirect land use change 
in its analysis?
    Answer. EISA mandates that significant indirect effects such as 
land use change be incorporated into the RFS lifecycle assessment. The 
International Organization for Standardization (ISO) sets out 
guidelines for development of lifecycle analysis and advises that 
lifecycle boundaries should include all components with significant 
effects on the environmental impact (i.e., greenhouse gas emissions) 
and expanded to take into account additional functions related to co-
products. EPA follows this guidance by incorporating indirect land use 
change into the lifecycle analysis in a manner that appropriately takes 
into account co-products.
    The State of California and the many independent studies on this 
topic have reached the same conclusion regarding indirect land use--and 
that is that indirect land use change in response to biofuel production 
can significantly impact associated lifecycle GHG emissions and 
therefore it must be considered. In fact, we understand that California 
has finalized their rulemaking including indirect land use change. EPA 
continues to communicate closely with the California Air Resources 
Board and with the European Commission and EU countries in regards to 
our respective work on greenhouse lifecycle assessment for biofuels and 
on land use change.
    EPA recognizes there is uncertainty in these analyses, which is why 
we are pursuing formal peer reviews of key components of the 
methodology, soliciting comments before finalizing the rule, and 
incorporating a process that recognizes that the science in this area 
will continue to evolve even after a final rule.

    Question 20. Indirect land use has deeply divided the scientific 
community and consensus does not exist. Before indirect effects apply 
to one sector of the U.S. economy and the only sector currently 
displacing foreign oil this needs to get figured out, and only then, 
should it be applied at all. It certainly cannot be applied to only 
biofuels. Please describe for this Committee--in detail and timeline--
your thoughts on ``indirect land use effects'' from tar sands, coal, 
and foreign oil?
    Answer. Our work to date has found that petroleum fuel production 
does not have the same indirect land use change emissions associated 
with biofuels because, unlike biofuels, there is not the same 
opportunity cost of land needed for petroleum extraction in the sense 
it is not replacing land that would otherwise be used to provide 
resources for an existing market (i.e., crop based biofuels displacing 
crops used for feed). There is potentially direct land use change 
emissions associated with extraction but these are estimated to be 
insignificant due to the relatively small amount of land required and 
the large amount of energy produced over the life of a crude oil well.
    For the final rule, we are also evaluating other indirect impacts 
associated with petroleum fuel production, such as petroleum product 
supply and demand changes associated with a marginal change in 
transportation fuel use. This will need to be evaluated in the context 
of the Act requirements of using a 2005 average baseline for petroleum 
fuels. EPA also is continuing to evaluate direct emission estimates for 
the final rule, including, for example, land needed in the surface 
mining of tar sands.

    Question 21. From a scientific and economic standpoint--does the 
disparity in application of this theory--bother the agency responsible 
for regulation?
    Answer. EPA's responsibility is to follow the law and, on this 
point, the law is clear. We are required to assess renewable fuel 
lifecycle greenhouse gas emissions, including direct emissions and 
significant indirect emissions, such as significant emissions from land 
use change. We are required to use a 2005 average petroleum baseline 
fuel. From a scientific standpoint, we use the same lifecycle 
boundaries for biofuels and petroleum-based fuels when addressing both 
domestic and international greenhouse gas impacts, in that we are 
including international extraction emissions from crude oil.
    As mentioned above, for the final rule, we are also evaluating 
indirect impacts associated with petroleum fuel production, such as 
petroleum product supply and demand changes associated with a marginal 
change in transportation fuel use. This will need to be evaluated in 
the context of the Act requirements of using a 2005 average baseline 
for petroleum fuels.

    Question 22. During the week of April 22, 2009--a study looking at 
one indirect effect from petroleum was published in the academic 
journal Biofuels, Bioproducts and Biorefining. The authors from the 
University of Nebraska found that the indirect emissions from 
safeguarding oil supplies in the Middle East double the carbon 
intensity of our gasoline imports from that part of world. Have you 
given any thought to the indirect emissions of foreign oil due to 
overseas military operations and expenditures? Have you seen the study? 
Has EPA considered this?
    Answer. We are aware of this particular report and have studied and 
considered how to measure the indirect emissions of foreign oil due to 
overseas military operations. EPA has explored this issue in a peer 
reviewed study of the energy security benefits of reducing U.S. oil 
imports. The review concluded that attribution of military costs to 
particular missions or activities is difficult. So while there may be a 
link between military expenditures and petroleum production, there is 
no methodology for allocating a portion of military expenditures to oil 
production and specifically an incremental change in oil imports. The 
same would be true from a lifecycle GHG emission context in that there 
is no methodology for allocating these emissions to petroleum 
production. However, this is an area we are continuing to study and one 
we specifically seek comment on in the proposed rule. In particular, we 
have asked for comment on how we can estimate the emissions associated 
with maintaining a U.S. military presence to help secure stable oil 
supply from potentially vulnerable regions of the world given the 
difficulty of attributing these emissions to particular missions or 
activities. Another consideration is that we must apply the same 
lifecycle boundaries for biofuels and petroleum-based fuels when 
addressing both domestic and international greenhouse gas impacts and 
therefore should also then consider emissions from military 
expenditures to protect domestic agriculture interests.

    Question 23. Did EPA work with other Federal agencies and CARB on 
your modeling? Did CARB use a different set of models than EPA? If so, 
why? Did you find fault with the CARB modeling?
    Answer. EPA worked very closely with other Federal agencies, in 
particular the Departments of Agriculture and Energy. Early in the 
process, we coordinated our analytical plan, receiving their 
concurrence. This was followed by numerous consultations and briefings 
along the way. We relied heavily on the technical inputs of USDA and 
DOE as we developed the best assumptions to use and then modeled the 
impacts of the rule. We similarly coordinated with CARB, sharing 
assumptions, results, and methods. Both EPA and CARB agreed that 
important assumptions used in running these models should be consistent 
and we worked closely to assure that was the case. We continue to work 
with CARB to improve the lifecycle GHG assessment of biofuels. In 
addition, we discuss and ask for comment in the NPRM on the approach 
that CARB has taken in their program.

    Question 24. I order to meet the requirements of the RFS2 for corn 
ethanol it is 15 billion gallons by 2022--I assume that if no new 
virgin acres came into production to meet that requirement, then by 
definition your ILUC number for corn ethanol would be zero, correct? If 
yes, then the reduction of GHG for corn ethanol should be 60%, not the 
16% in the rule? Can you please clarify?
    Answer. No, that is not correct. Our methodology compares land use 
changes occurring under two scenarios--one with the RFS volume mandates 
in place and one without. So we are considering for a given year, the 
opportunity cost of using feedstocks and land for biofuels production 
as opposed to what the land would be used for absent biofuels 
production. Therefore, even if corn ethanol production increased from 
current levels to 15 Bgal in 2022 without any observable land use 
change in the U.S., there would still be an indirect land use change 
associated with the corn ethanol production in 2022. What we are 
comparing is how much land would be required to meet worldwide demand 
for food and feed in 2022 assuming the RFS2 in place versus no RFS2. So 
even if yields are increasing to help meet increasing demand over time, 
the increased demand for land associated will biofuels will have an 
indirect impact from what would have happened otherwise.
Questions Submitted By Hon. Stephanie Herseth Sandlin, a Representative 
        in Congress from South Dakota
    Question 1. At the hearing on May 6, 2009, you testified in 
response to my questioning that the indirect emissions were broken out 
to show the difference between international and domestic sources. For 
corn ethanol, for example, EPA has provided a table (Table VI.C.1-1) 
which appears to outline various elements of the lifecycle analysis for 
a natural gas dry mill that dries its distiller grains (p. 315). Table 
VI.C.1-2 then provides two columns of EPA's estimate of reductions 
under two options for each of the corn ethanol pathways identified by 
EPA (p. 317). EPA does not explain how these tables reflect the fuel's 
lifecycle stage being considered as outlined in the remainder of the 
preamble or how Table VI.C.1-1 relates to the additional pathways in 
Table VI.C.1-2. I request that EPA provide the following information as 
requested in the tables listed below.
    For Table VI.C.1-1 (and similar tables for other fuels), identify 
the fuel lifecycle stage being addressed by the emissions, a list of 
source of emissions for that stage, and whether such emissions are 
direct or indirect, and identify the total net emissions without 
international land use change and with international land use change. 
Where there are no emissions references for the petroleum baseline, 
please provide an explanation as to why there are no such numbers:
    Answer.

 Modified Table VI.C.1-1--Absolute GHG Emissions for Corn Ethanol and the 2005 Petroleum Baseline (CO2-eq/mmBtu)
                                 With and Without International Land Use Changes
----------------------------------------------------------------------------------------------------------------
                           2005 Gasoline       Natural Gas Dry Mill      2005 Gasoline      Natural Gas Dry Mill
                              Baseline             with dry DGs             Baseline            with dry DGs
----------------------------------------------------------------------------------------------------------------
   Lifecycle Stage                       100 yr 2%
                                         30 yr 0%
----------------------------------------------------------------------------------------------------------------
Feedstock/Fuel         823,262                1,436,720              573,058                1,037,279
 Production
  --Direct Emissions   --Crude oil            --Agricultural inputs  Same as 100 yr 2%      Same as 100 yr 2%
   (list sources of     extraction             and emissions from
   emissions)          --Transport of crude    growing corn used in
                        oil to refinery        ethanol production
                       --Upstream and onsite  --Land use change to
                        energy use and         grow corn used in
                        emissions at           ethanol production
                        refinery to produce   --Upstream and onsite
                        gasoline               energy use at
                       --Distribution of       ethanol production
                        gasoline               plant
  --Indirect           --EISA requires that   --Agricultural inputs  Same as 100 yr 2%      Same as 100 yr 2%
   Emissions (list      lifecycle GHG          and emissions from
   sources of           emissions of           growing crops
   emissions,           renewable fuels be     indirectly impacted
   excluding            compared to a 2005     by use of corn for
   international land   average petroleum      ethanol production
   use changes)         baseline.              (domestically and
                         Determining           internationally)
                        indirect impacts      --Indirect domestic
                        would require EPA to   land use changes
                        estimate, for          including changes in
                        example, petroleum     soil management
                        displaced by           practices
                        renewable fuel. This  --Changes in
                        analysis seems         livestock production
                        inconsistent with
                        the statute's 2005
                        baseline
                        requirement.
                        However, the NPRM
                        seeks comment on
                        this.
Fuel and Feedstock     Included in Feedstock/ 174,327                Included in Feedstock/ 121,346
 Distribution and       Fuel Production                               Fuel Production
 Delivery
Use of Finished Fuel   3,417,411              37,927                 2,378,800              26,400
 (Tailpipe Emissions)
Net Total Emissions    4,240,674              1,648,974              2,951,858              1,185,025
 (w/o indirect
 emissions from
 international land
 use changes)
Indirect emissions     --EISA requires that   1,911,391              Same as 100 yr 2%      1,910,822
 from international     lifecycle GHG
 land use changes       emissions of
                        renewable fuels be
                        compared to a 2005
                        average petroleum
                        baseline.
                        Determining indirect
                        impacts would
                        require EPA to
                        estimate, for
                        example, petroleum
                        displaced by
                        renewable fuel. This
                        analysis seems
                        inconsistent with
                        the statute's 2005
                        baseline
                        requirement.
                        However, the NPRM
                        seeks comment on
                        this
Net Total Emissions    4,240,674              3,560,365              2,951,858              3,095,846
----------------------------------------------------------------------------------------------------------------


    Question 2. For Table VI.C.1-2 (and similar tables for other 
fuels), identify the percent reductions without consideration of 
international land use changes, as follows:
    Answer.

       Modified Table VI.C.1-2--Lifecycle GHG Emissions Changes for Various Corn Ethanol Pathways in 2022 Relative to the 2005 Petroleum Baseline
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Percent Change from      Percent Change from      Percent Change from
                                                          2005  Petroleum          2005  Petroleum        2005 Baseline (30 yr     Percent Change from
         Corn Ethanol Production Plant Type             Baseline (100 yr 2%,     Baseline (100 yr 2%,         0%, without          2005 Baseline (30 yr
                                                       without international   with international land   international land use   0%, with international
                                                         land use changes)           use changes)               changes)            land use changes)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: EPA's approach to lifecycle modeling considers all significant direct and indirect sources of emissions. It is invalid to present results that
 only omit emissions from international land use change. Lifecycle modeling accounts for land use change as well as other ``positive'' indirect impacts
 in terms of biofuels GHG emissions, such as reductions in livestock emissions and shifting of crop production to regions with lower GHG impacts. The
 lifecycle modeling and results are internally inconsistent when only one of the indirect impacts is omitted. The results without international land use
 change presented below are for illustrative purposes only.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Natural Gas Dry Mill with dry DGs                                        ^61%                     ^16%                     ^60%                      +5%
Natural Gas Dry Mill with dry DGs and CHP                                ^64%                     ^19%                     ^63%                      +2%
Natural Gas Dry Mill with dry DGs, CHP, and Corn Oil                     ^72%                     ^27%                     ^71%                      ^6%
 Fractionation
Natural Gas Dry Mill with dry DGs, CHP, Corn Oil                         ^76%                     ^30%                     ^74%                     ^10%
 Fractionation, and Membrane Separation
Natural Gas Dry Mill with dry DGs, CHP, Corn Oil                         ^80%                     ^35%                     ^79%                     ^14%
 Fractionation, and Membrane Separation, and Raw
 Starch Hydrolysis
Natural Gas Dry Mill with wet DGs                                        ^72%                     ^27%                     ^70%                      ^6%
Natural Gas Dry Mill with wet DGs and CHP                                ^75%                     ^30%                     ^74%                      ^9%
Natural Gas Dry Mill with wet DGs, CHP, and Corn Oil                     ^78%                     ^33%                     ^76%                     ^12%
 Fractionation
Natural Gas Dry Mill with wet DGs, CHP, Corn Oil                         ^81%                     ^36%                     ^80%                     ^15%
 Fractionation, and Membrane Separation
Natural Gas Dry Mill with wet DGs, CHP, Corn Oil                         ^84%                     ^39%                     ^83%                     ^18%
 Fractionation, and Membrane Separation, and Raw
 Starch Hydrolysis
Coal Fired Dry Mill with dry DGs                                         ^32%                     +13%                     ^31%                     +34%
Coal Fired Dry Mill with dry DGs and CHP                                 ^35%                     +10%                     ^33%                     +31%
Coal Fired Dry Mill with dry DGs, CHP, and Corn Oil                      ^51%                      ^5%                     ^49%                     +15%
 Fractionation
Coal Fired Dry Mill with dry DGs, CHP, Corn Oil                          ^58%                     ^13%                     ^57%                      +8%
 Fractionation, and Membrane Separation
Coal Fired Dry Mill with dry DGs, CHP, Corn Oil                          ^67%                     ^21%                     ^65%                      ^1%
 Fractionation, and Membrane Separation, and Raw
 Starch Hydrolysis
Coal Fired Dry Mill with wet DGs                                         ^54%                      ^9%                     ^53%                     +12%
Coal Fired Dry Mill with wet DGs and CHP                                 ^56%                     ^11%                     ^55%                     +10%
Coal Fired Dry Mill with wet DGs, CHP, and Corn Oil                      ^63%                     ^17%                     ^61%                      +3%
 Fractionation
Coal Fired Dry Mill with wet DGs, CHP, Corn Oil                          ^70%                     ^25%                     ^69%                      ^4%
 Fractionation, and Membrane Separation
Coal Fired Dry Mill with wet DGs, CHP, Corn Oil                          ^75%                     ^30%                     ^74%                      ^9%
 Fractionation, and Membrane Separation, and Raw
 Starch Hydrolysis
Biomass Fired Dry Mill with dry DGs                                      ^84%                     ^39%                     ^83%                     ^18%
Biomass Fired Dry Mill with wet DGs                                      ^85%                     ^40%                     ^84%                     ^19%
Natural Gas Fired Wet Mill                                               ^52%                      ^7%                     ^51%                     +14%
Coal Fired Wet Mill                                                      ^25%                     +20%                     ^24%                     +41%
Biomass Fired Wet Mill                                                   ^92%                     ^47%                     ^91%                     ^26%
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Question 3. As requested above, please provide a similar analysis 
for Table VI.C.1-3 (Corn Ethanol Lifecycle GHG Emissions Changes in 
2012, 2017, and 2022).
    Answer.

                              Modified Table VI.C.1-3--Corn Ethanol Lifecycle GHG Emissions Changes in 2012, 2017, and 2022
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                 Percent Change from                               Percent Change from
                                                        Percent Change from        2005  Petroleum        Percent Change from        2005  Petroleum
                Scenario Description                      2005  Petroleum        Baseline (100 yr 2%,       2005  Petroleum        Baseline (30 yr 0%,
                                                        Baseline (100 yr 2%)    without international     Baseline (30 yr 0%)     without international
                                                                                  land use changes)                                 land use changes)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: EPA's approach to lifecycle modeling considers all significant direct and indirect sources of emissions. It is invalid to present results that
 only omit emissions from international land use change. Lifecycle modeling accounts for land use change as well as other ``positive'' indirect impacts
 in terms of biofuels GHG emissions, such as reductions in livestock emissions and shifting of crop production to regions with lower GHG impacts. The
 lifecycle modeling and results are internally inconsistent when only one of the indirect impacts is omitted. The results without international land use
 change presented below are for illustrative purposes only.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Corn Ethanol Natural Gas Dry Mill in 2012 with dry                       ^16%                     ^61%                      ^3%                     ^60%
 DGs
Corn Ethanol Natural Gas Dry Mill in 2017 with dry                       ^13%                     ^61%                      +9%                     ^60%
 DGs
Corn Ethanol Natural Gas Dry Mill in 2022 with dry                       ^16%                     ^61%                      +5%                     ^60%
 DGs
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Question 4. As requested above, please provide a similar analysis 
for Table VI.C.1-4 (Corn Ethanol Lifecycle GHG Emissions Changes 
Associated with Different Volume Changes).
    Answer.

                     Modified Table VI.C.1-4--Corn Ethanol Lifecycle GHG Emissions Changes Associated with Different Volume Changes
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                 Percent Change from                               Percent Change from
                                                        Percent Change from        2005  Petroleum        Percent Change from        2005  Petroleum
                Scenario Description                      2005  Petroleum        Baseline (100 yr 2%,       2005  Petroleum        Baseline (30 yr 0%,
                                                        Baseline (100 yr 2%)    without international     Baseline (30 yr 0%)     without international
                                                                                  land use changes)                                 land use changes)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: EPA's approach to lifecycle modeling considers all significant direct and indirect sources of emissions. It is invalid to present results that
 only omit emissions from international land use change. Lifecycle modeling accounts for land use change as well as other ``positive'' indirect impacts
 in terms of biofuels GHG emissions, such as reductions in livestock emissions and shifting of crop production to regions with lower GHG impacts. The
 lifecycle modeling and results are internally inconsistent when only one of the indirect impacts is omitted. The results without international land use
 change presented below are for illustrative purposes only.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Corn Ethanol Natural Gas Dry Mill in 2022 with dry                       ^16%                     ^61%                      +5%                     ^60%
 DGs; 2.7 Bgal change in corn ethanol volumes
Corn Ethanol Natural Gas Dry Mill in 2022 with dry                        ^6%                     ^52%                     +14%                     ^51%
 DGs; 6.3 Bgal change in corn ethanol volumes
--------------------------------------------------------------------------------------------------------------------------------------------------------


    Question 5. How does EPA (or the models EPA used) determine what 
factor(s) cause specific land use change?
    Answer. The methodology EPA has developed isolates the impacts of 
biofuels production, which allows us to differentiate and assign just 
the land use change directly caused by increases in renewable fuels. 
This approach considers the impacts of increased biofuels production 
versus a baseline that incorporates the number of other factors you 
mention. Therefore the only change we measure is from biofuels 
production, keeping all other factors constant.
    To do this work, we combine a suite of peer-reviewed process models 
and peer-reviewed economic models of the domestic and international 
agricultural sectors to determine direct and significant indirect 
emissions, respectively. These agricultural sector models allow us to 
estimate the total additional cropland needed internationally and where 
(by country) expansion would occur for the specific factor of increased 
biofuels production. To determine what types of land are converted to 
meet this additional cropland demand, we use recent land use trends 
based on satellite data. These trends take into account a number of 
drivers, but for the purposes we are using them for (i.e., to determine 
what type of land is converted with increased cropland expansion) they 
apply for any driver of cropland expansion, including biofuels.
Questions Relating to Biodiesel:
    Question 6. Is it correct that you took 2001to 2004 land conversion 
rates and extrapolated those into the future to come up with the 
calculation of land use change you expect?
    Answer. No, this is not the case. In our analysis, the causes of 
crop expansion are captured with economic modeling. We rely on well-
established economic models to project the amount of crop expansion in 
each country resulting from increased biofuel production. We then use 
satellite data to determine not the amount of land that might be 
converted but what types of land will be used in a particular country 
if additional land is needed for crop production as a result of U.S. 
biofuels expansion.
    We recognize that this is an area of potential uncertainty. 
Therefore, the use of satellite data is one of the components of the 
lifecycle analysis that we are having peer-reviewed and have 
specifically asked for comment on throughout the rulemaking process.

    Question 7. If U.S. biodiesel production from 2001 to 2004 grew 
from 5 million gallons in 2001 to 25 million gallons in 2004, is it 
unreasonable to conclude that biodiesel was not a significant cause of 
land use change that occurred from 2001 to 2004? Why or why not?
    Answer. No, this is not a correct conclusion. Our methodology 
compares land use changes occurring under two scenarios--one with the 
RFS volume mandates in place and one without. We are not comparing 
changes in emissions or land use over time but comparing the 
opportunity cost of using a feedstock or land for biofuel production in 
a given year. So a more appropriate comparison is what land use would 
have been in 2004 without the increase in biodiesel production.
Questions Submitted By Hon. Deborah L. Halvorson, a Representative in 
        Congress from Illinois
    Question 1. As you know, in the 2007 energy bill EPA was tasked 
with determining the lifecycle greenhouse gas emissions of current and 
future transportation fuels as part of the new renewable fuels 
standards. EPA has released published for comment a proposed rulemaking 
on this issue, but has had difficulty in finding consensus on the 
methodology, especially with respect to the issue of emissions from 
indirect land use change.
    My understanding is that the issue of greenhouse gas emissions from 
indirect land use change is a highly controversial one in the 
scientific community, and that there is still a very limited 
understanding of how biofuels production--or petroleum production and 
other economic activities, for that matter--impact land use change 
around the world. What will EPA do to resolve this uncertainty, and how 
will it implement the renewable fuels standards in a timely fashion 
while continuing to develop a greater understanding of this complex 
problem?
    Answer. As mandated by EISA, EPA's greenhouse gas emission 
assessments must evaluate the full lifecycle emission impacts of fuel 
production including both direct and indirect emissions, including 
significant emissions from land use changes. There is no question that 
this task was a challenge and required groundbreaking work. This is why 
we have taken every opportunity to test our assumptions, minimize 
uncertainties and maximize transparency.

    Question 1a. Will EPA re-examine the indirect land use issue in 
light of new research showing that initial estimates may have been 
overstated?
    Answer. EPA has spent the last year and half developing a 
technically and scientifically sound analysis of the full lifecycle GHG 
emission impacts of biofuels that incorporates indirect land use 
changes, using well-accepted, peer-reviewed models. This process has 
included reviewing the research in this field and, in many cases, 
consulting with the authors of this research. Through this effort, EPA 
has determined that indirect emissions comprise a significant portion 
of the total lifecycle emissions of biofuels. Many studies in the peer-
reviewed literature also show that indirect land use emissions comprise 
a significant portion of the total lifecycle emissions of some biofuel 
pathways.
    We also recognize the significance of using lifecycle greenhouse 
gas emission assessments that include indirect impacts such as emission 
impacts of indirect land use changes and acknowledge the varying 
degrees of uncertainty in the different aspects of our analysis. As 
described above, we have taken a number of steps to address this 
uncertainty. However, EPA recognizes that the science in this area will 
continue to evolve even after a final rule. Thus, we are committed to 
revising and updating our analysis on an ongoing basis as new data and 
information comes available.
    Question 2. The issue of lifecycle analysis for biofuels is just 
one example of why scientists are critical to the mission at EPA. What 
will you do to ensure that scientists play a bigger role at EPA?
    Answer. EPA is committed to using scientific expertise housed both 
within and outside the Agency. EPA's scientists, other Federal 
scientists (e.g., USDA, DOE) and scientists at U.S. universities have 
and will continue to directly contribute to the development of the data 
and models for the lifecycle analysis. In addition, EPA is conducting 
formal peer review processes for several key components of the 
lifecycle analysis. During this process, external scientists will 
extend their expertise to provide third-party feedback on EPA's 
methodologies. EPA will continue to use research and knowledge 
developed by the nation and the world's scientific community as we 
proceed in refining the lifecycle analysis proposed in the NPRM.
    Throughout this work, EPA has remained committed to fostering sound 
science, consistent with the President's March 9, 2009 memorandum on 
scientific integrity. Our analyses are based upon the best science 
available, with every step of the process building upon our extensive 
collaboration with both Federal and independent scientific experts.

    Question 3. We are supposed to have 500 million gallons of 
biodiesel in 2009. My district lost a biodiesel plant this year. How is 
EPA insuring 500 million gallons are used this year?
    Answer. Although the RFS2 program will not be in place in 2009, 
after coordinating with our stakeholders, we are proposing a means of 
still implementing the statutory requirement for 500 million gallons of 
biomass-based diesel for 2009. While the RFS1 regulations do not 
provide a mechanism for putting this requirement in place in 2009, in 
our Notice of Proposed Rulemaking we are proposing that the 2009 
requirement of 500 million gallons and the 2010 requirement of 650 
million gallons be added together, with the total volume of 1.15 
billion gallons applicable in 2010 under RFS2. Obligated parties could 
then use credits (RINs) from both 2009 and 2010 to comply, and would 
have a strong incentive to blend biodiesel in 2009 in addition to 2010.

                                  
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